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Penn. School Board Member Questions Cyber Charter School Funding

Financial data that a cyber charter school submitted to the IRS shows revenue far exceeding expenses, while its graduation rate is 68.4 percent. Some district officials now want lawmakers to reform charter school funding.

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(TNS) — School board member Rick Rovegno is calling for more stringent oversight on how a cyber charter school is receiving money from South Middleton School District for student tuition.

"It's apparent to me there needs to be greater scrutiny and examination of the charges being billed to the school district from the Commonwealth Charter Academy," he said in a phone interview Tuesday morning. "We [the district] should not be billed significantly more than the actual cost of delivering the services."

During a Monday night meeting, Rovegno briefed fellow board members on his interpretation of financial data Commonwealth Charter submitted to the IRS as part of its annual Form 990 Return of Organization Exempt from Income Tax.

Rovegno said the school, which is considered a nonprofit organization, consistently reported revenue far exceeding expenses, along with annual fund balances in the hundreds of millions of dollars.

"I got some information from the Pennsylvania Department of Education," Rovegno said Monday, adding that the graduation rate for CCA is about 68.4 percent. "That's not great in my opinion," he told fellow board members.

By comparison, the graduation rate for South Middleton School District is about 93.6 percent while the state average is about 89.7 percent, according to the latest Future Ready Index data.

Rovegno called on board members to contact state lawmakers to press for charter school funding reform. Only state senators and representatives have the authority to change the funding formula, he said. "We should ask them what they would propose to do."

In a phone interview Wednesday, Tim Eller, the academy's senior vice president for outreach and government relations, said Rovegno took the graduation rate and Form 990 numbers out of context.

"We're not billing South Middleton School District," Eller said. "South Middleton is paying what the law says they need to pay. We're not coming up with arbitrary tuition rates. Those rates are set by state law."


Rovegno attended the March 4 meeting when Dean Clepper, a retired educator, asked school board members to hold down costs to avert a proposed 5.3 percent real estate tax increase in 2024-25. Rovegno said he has done research since then to better understand the major cost drivers that affect the district's annual general fund budget.

"We have a budget of around $45 million," Rovegno said Monday, referring to the 2023-24 fiscal plan. Of that total, the state has required the district to pay about $1.86 million in tuition payments to charter schools — with the bulk of that money going to Commonwealth Charter Academy.

There are about 105 school-aged children in the district who attend an outside charter school instead of a district public school or the Bubbler Cyber Academy, Rovegno said. Roughly three-quarters of those students attend Commonwealth Charter Academy, he said.

Rovegno said he analyzed Form 990 paperwork filed by the academy. For fiscal year 2020-21, the charter school reported about $315.5 in revenue and about $203.8 million in operating expenses. Though classified as nonprofit, CCA posted a gain of 64 percent of revenue over expenditures for that year.

"We're paying for that," Rovegno said. "Their fund balance ending 2020-21 was $182.6 million." That means the academy's reserves equate to about 89 percent of its expenses, he said. By comparison, South Middleton School District is operating with a fund balance of about $9 million or about 20 percent of its budget.

"It gets better," Rovegno told board members. According to Form 990, the charter school posted revenues of about $397.2 million and expenses of about $274.7 million for 2021-22. The fund balance that fiscal year was $305.1 million or 111 percent of operating expenses.

"I will get the 990 that is coming in May for 2022-23," Rovegno said. "If they [the academy] stay on the same trend line, their fund balance is going to be half a billion dollars.

"So, what can we do reasonably?" he asked board members. "We can call our state representatives and state senator and provide some of this statistical information."

Based on his calculations, South Middleton should be charged about $600,000 less per year in student tuition.

COSTS IN CONTEXT


"The 990 is just a snapshot in time," Eller said. "It's the snapshot for the end of the year. What it doesn't capture is the money we put aside to pay for our buildings and infrastructure. We don't have the ability to capture funding from the state or even locally to pay for infrastructure or maintenance. So, any additional funds that we have are put into reserve accounts to pay for those buildings and infrastructure."

The academy has about 20 buildings placed regionally across Pennsylvania, along with an extensive computer network to run its learning management system, Eller said. While this expense shows up as a fund balance on the 990 Form, the actual money set aside in an annual reserve has been less than $1 million over the same fiscal period cited by Rovegno, Eller said.

Like the school district, the charter school has an unassigned fund balance to offset cash flow shortfalls. In 2019-20, the charter school had $904,877 in this reserve, according to data provided by Eller. That decreased to $608,162 in 2020-21 and to $536,005 in 2021-22.

Contrary to what public school officials say, there is no 100 percent dollar-for-dollar transfer of money from a school district to an outside charter school each time a family exercises its right to school choice, Eller said. About 30 percent of the cost per student is retained by the district to cover its overhead while 70 percent follows each student to the charter school, he said.

For South Middleton, the charter school tuition rates for 2023-24 are $13,896.48 per nonspecial education student and $28,864.91 per special education student, Eller said. The special education rate is the sum of two parts — nonspecial education, plus a special education add-on, he said.

GRADUATION RATES


Rovegno on Monday quoted the Pennsylvania Department of Education statistic of a 68.4 percent graduation rate for Commonwealth Charter students.

"What he's doing is comparing a local district to a cyber charter school that has a statewide enrollment," Eller said. "Not all our students come from South Middleton. Most of our students come from lower performing districts.

"What is missing, as part of that calculation, is the number of students who enroll in CCA who are outside their graduation cohort," Eller said. "About two-thirds of our high school [student body] is brand new every school year. When you're talking about kids who have been here since the seventh or eighth grade, that go into our high school program, that's about a 93 percent graduation rate."

©2024 The Sentinel (Carlisle, Pa.). Distributed by Tribune Content Agency, LLC.