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Opinion: Pennsylvania Cyber Charter Schools Holding $164M

A nonprofit advocacy group says Pennsylvania’s 14 cyber charter schools held a combined $164 million in unassigned fund balances in the 2020-21 school year, essentially stockpiling funds that should be spent on students.

money jar for education funding
(TNS) — The state auditor general recently questioned the amount of money some school districts are holding in their savings accounts. So what about cyber charter schools?

Wall Street bankers would be envious at how the savings of some cyber charters have grown in recent years. Their vaults are brimming, yet they’re still siphoning tax dollars from strugging school districts such as Allentown.

How is that fair?

The auditor general should examine that, too. And state lawmakers should step up to prohibit charters from hording cash that’s intended to be spent educating kids.

Pennsylvania’s 14 cyber charter schools held a combined $164 million in unassigned fund balances — meaning the money is not being held for a specific purpose — in the 2020-21 school year, according to a report last year by the PA Charter Performance Center, part of Children First, a progressive-leaning nonprofit advocacy organization in Philadelphia.

Those are the latest figures available. Figures from last school year are expected to be available this spring.

The cyber charters more than doubled their savings from $75 million in 2019-20. And they held seven times more than the $22 million in 2018-19, according to the report.

It said the findings could not be attributed to rising enrollment because while enrollment rose, fund balances rose faster.

“There’s something really broken with the way that we’re funding cyber charter schools when they can be awash in so much excess money when school districts are doing their best to try to give kids what they need and they’re raising property taxes to pay cyber charter schools,” said Susan Spicka, executive director of Education Voters of Pennsylvania, a project of the left-leaning Keystone Research Center.

“The whole system just needs to be fixed,” she told me Wednesday. “It’s unbalanced.”

I sought a response from the Pennsylvania Coalition of Public Charter Schools but did not hear back from them.

State law regulates how much a school district can keep in savings. To raise property taxes, their unreserved, undesignated fund balance cannot exceed 8 percent of expenses.

In a recent audit, state Auditor General Timothy DeFoor questioned whether some districts were playing “shell games” to skirt that law, as they moved savings to other savings accounts earmarked for specific purposes.

His audit wasn’t fair to school districts because it lacked context. Many districts have good reasons to hold savings in special accounts, such as if they are in the midst of construction projects.

But his point about watching fund balances is a good one. Now, it’s time for DeFoor or someone else to examine the loot being accumulated by cyber charter schools.

Eleven of Pennsylvania’s 14 cyber charters reported having unassigned fund balances that exceeded 8 percent of their expenses in 2020-21, according to the report from PA Charter Performance Center.

Some were grossly in excess, according to the report.

ASPIRA Bilingual Cyber, Esperanza Cyber and Central PA Digital Learning Foundation had savings that exceeded 50 percent of expenditures. Insight PA Cyber and Pennsylvania Cyber reported unassigned fund balances of more than 40 percent of their expenditures.

“Cyber charters are stockpiling funds that should be spent on students or returned to taxpayers,” ML Wernecke, director of the PA Charter Performance Center, told me Wednesday.

DeFoor’s office did not respond to my question about whether he plans to audit cyber charters.

Last year, he announced his office no longer would audit schools. He said he doesn’t have the staff because the number of auditors has been cut drastically over the years. Besides, he said, school audits are the responsibility of the state Department of Education.

Yet he found the staff to audit the savings and tax hike requests of a dozen school districts, including Bethlehem Area and Northampton Area.

I asked the Department of Education if it plans any audits. That question also went unanswered.

It’s disappointing when public officials duck such questions. The public deserves assurance that someone is monitoring how their tax dollars are spent. The lack of answers doesn’t instill confidence.

State lawmakers also have a responsibility to ensure that cyber charter schools spend the money they receive on education.

In January 2021, state Rep. Anthony DeLuca, D-Allegheny, introduced legislation that would limit how much charter schools could keep in savings to be eligible to receive tuition payments from school districts.

He suggested charters be required to keep their fund balances at less than 5 percent of their budgeted expenses.

DeLuca’s proposal was not adopted.

Only nine other representatives signed on as co-sponsors and the bill expired last year without being considered by the House Education Committee. All co-sponsors were Democrats, including Rep. Mike Schlossberg of Lehigh County.

DeLuca died last year. Another lawmaker needs to pick up that flag and march forward.

Another way to ensure cyber charters are not collecting tax dollars in excess of what they need is for Pennsylvania to follow the lead of other states and create a statewide tuition rate.

I’ve raised this point a few times previously, and will repeat what I said then: Lawmakers are derelict in their duties if they can’t see how ridiculous the funding formula is for cyber charters.

Under state law, they are paid at the same rate per student as traditional charter schools.

But cyber charters don’t have the same buildings, supplies and infrastructure to pay for. They also may have fewer teachers.

School districts now pay different tuition rates to cyber charters, based on what it costs them to educate their students. Cyber charters can receive $7,300-$18,000 per student, depending on the district they come from, according to Education Voters of Pennsylvania.

Legislation to set a statewide rate of $9,457, more for special education students, failed to get support last year.

It’s reasonable for cyber charters to have some money in the bank. Unlike school districts, they cannot raise taxes. So they must have reserves for unexpected costs. But they shouldn’t be competing with Fort Knox.

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