Cyber charter schools spend more money educating students than traditional schools — after removing the costs of maintaining buildings and transporting students.
That’s one of the findings from PennLive’s analysis into how cyber schools spend and save their money.
That’s also a point Pa.’s cyber school leaders have been trying to hammer home to Pa.’s political leaders: Cyber schools have substantial additional costs that local school leaders don’t always appreciate, such as the cost of providing internet and the cost of paying for more expensive software and curriculum.
And while cyber schools have been saving money faster than local public schools, their increased savings has sometimes been overstated. Brick and mortar charter schools, and to a lesser extent even local districts, have been building up their savings as a result of increased pandemic funding.
The extent to which state legislators take into account these facts could impact the size of your local tax bill and quality of your local school going forward.
That’s because one of the most prominent proposals Harrisburg leaders are considering to help balance the budget is to reform how cyber charter schools are funded.
Proponents say this will save local school districts a quarter of a billion dollars that are now being wasted. Opponents say this change will effectively put cyber charters out of business, stranding nearly 70,000 students.
Not every cyber charter operates in exactly the same way. Commonwealth Charter Academy, Pa.s’ largest cyber charter, has been spending $100s millions to buy and construct buildings for its staff and families across the commonwealth. And as a result, it spends less per student in most other areas.
This strategy seems to be working — the school’s rapid enrollment growth is one of the primary reasons some local school districts find themselves in an unstable financial situation.
COMPARING SPENDING
Local school district leaders say cyber charter schools shouldn’t receive as much funding because they don’t have to pay for buildings or transportation. Cyber charter leaders say they spend more on curriculum and have additional expenses that local school districts don’t have, such as enhanced technology.
The financial data indicate both of these claims are true.
Both district schools and cyber schools spend the majority of their money on direct instructional costs, most of which go to teacher salaries and benefits.
But their overall personnel costs are not the same. Traditional districts spend more on their staff because they have to pay the salaries of bus drivers and maintenance staff and the administrators who oversee those programs.
Some school districts claim their own cyber charter schools can educate students for less than what the statewide cyber charters are spending, but even Democrats on the House Education Committee said they hadn’t yet seen a credible breakdown of those expenses.
“There are additional costs to school districts that aren’t being added into, or at least I’m not convinced are being added into those district costs,” said Rep. Peter Schweyer, the Democratic chair of the House Education Committee.
That didn’t stop Schweyer and other House Democrats from voting in June for a proposal to limit cyber charter tuition to $8,000 per regular education student. One of their main justifications was the large amount of money cyber charter schools have been accumulating in savings.
COMPARING SAVINGS ACCOUNTS
Earlier this year Republican Auditor General Tim DeFoor looked at five of the largest cyber charter schools and found the amount of money they were saving had rapidly increased during the pandemic.
“This accumulation and more than doubling of governmental fund balance totals over the audit period due to the surpluses of revenue over expenditures could be considered excessive for a public school entity,” the audit report states.
The differences don’t appear as large once you account for enrollment growth in cyber charters during this period. In fact, the amount of money saved by cyber charters appeared to be relatively similar to the amount saved by brick and mortar charter schools.
Michael Whisman, a charter school financial expert, said charter schools need somewhat larger fund balances because they don’t have the ability to tax or generate revenue on their own.
“To the extent a school district needs a fund balance, we need a fund balance plus a little more to give us some comfort in our budgets that are already approved for this school year,” Whisman said.
Whisman said focusing only on general fund balances left out several important ways that traditional districts set aside money to pay for buildings and pay off debt. PennLive found that, by these broader measures, the discrepancies between cyber charter schools and traditional schools were smaller.
Even with these adjustments, cyber charter schools saved more.
Rep. Schweyer said this was proof their funding formulas were too generous. These surpluses should have been redirected back toward students who were struggling, he said.
“When we see their test scores on the whole significantly lower than traditional school districts or frankly brick and mortar charter schools, I don’t know how you could justify having such extra bloat,” he said. “I’d be really, really mad if my school district was not investing that money back in my kid or giving me a property tax cut.”
But now that the additional federal COVID funding has ended, the rapid increase of these fund balances will also come to an end, according to several cyber and traditional education finance experts.
Jonathon Shiota, the business manager at 21st century Cyber Charter, said the reason for the large surpluses at cyber schools was partly due to rapid pandemic enrollment increases.
“Schools like ours served thousands of new students without the need to expand physical infrastructure,” he said, “creating temporary surpluses that have since stabilized.”
CYBER SCHOOLS SPEND DIFFERENTLY
Maura McKinnery, the legal director for the Education Law Center, testified in May the cost to run school buildings substantially outweighs some of the cyber charter schools’ unique expenses.
“They don’t have physical classrooms, laboratories, energy costs, building maintenance,” she said.
But Republican Rep. Marc Anderson of York County interjected that this wasn’t entirely correct.
“Ma’am, I’ve been to cyber charter buildings where they have laboratories and they have classrooms and they have lights to keep on and air conditioning,” he said. “So that’s not altogether accurate.”
Anderson was referring to Commonwealth Charter Academy, [CCA] which more than any other cyber school has been investing widely in buying properties and construction. The school owns 12 buildings, leases five buildings, is constructing eight buildings, and is in the planning process for five more. Many of the smaller cyber schools have one or two buildings and often lease them rather than own them.
Local school district leaders and Pennsylvania’s auditor general have called out CCA for spending so much on its buildings when, they say, the purpose of cyber school is that it should minimize the school’s physical footprint.
“That was astounding when I saw that they have $200 million just laying around,” Rob Gleason, a local school board president testified to the House Education Committee in May. “I didn’t know [cyber schools] had buildings. Why do they have buildings?”
CCA’s leaders say these buildings are necessary to provide office space for its staff of more than 2,500 employees across the commonwealth, as well as provide ancillary services to students.
“Our families consistently tell us they want a high-quality online education program that also offers local, in-person support, including field trips and familiar settings for tutoring and state testing,” said Tim Eller, a spokesperson for CCA.
The scope of the school’s investment in buildings also means it spent less on other educational expenses compared to other cyber charters.
While cyber schools are being criticized for wasting taxpayer money, Eller said, these long-term investments in buildings will actually lower CCA’s costs in the long run. “Our overarching goal is to limit overhead costs, including debt service, while preserving the educational programs, services, and support that our students and families deserve,” Eller said.
FUNDING REFORM AND THE FUTURE
A collective of 12 education advocacy organizations, including Education Voters of PA, wrote a letter to Harrisburg leaders, urging them to include cyber charter funding reform in their budget negotiations.
“The current funding system for cyber charters requires school districts to pay cyber charter tuition bills that far exceed what the cyber schools are spending to educate their students,” the letter reads.
Changing the funding formula will send more money back to local districts – but it won’t solve their budgetary challenges. The number of students attending cyber charter schools nearly doubled during the pandemic. And while the growth has since slowed, it is still increasing. Nearly all of the growth has occurred at one cyber school — CCA, which enrolls about half of the roughly 70,000 students who were attending a cyber school at the end of June.
The growth has been unevenly distributed across the commonwealth, hitting some school districts harder than others. For example, nearly 200 students left the Greater Johnstown School District for a cyber school since the pandemic — an increase of more than 115 percent.
“The lack of predictability in these costs presents a significant barrier to planning for essential services and staffing increases,” testified Michael Dadey, the assistant to the superintendent in Johnstown.
Legislators have been debating a proposal that could severely limit future enrollment growth. The proposal would cap the enrollment of cyber charters that are under school improvement plans. The proposal would require cyber schools to increase their testing and graduation rates before they could admit additional students above a cap. Twelve out of 14 cyber schools would fall under a cap, including CCA.
Cyber advocates say this could leave some students without a cyber option and doesn’t address the underlying reasons why parents are choosing cyber schools.
“Why has CCA’s enrollment more than tripled in the past five years?” Eller said in an email. “Across Pennsylvania, families are navigating serious concerns in their local districts, including bullying by both students and staff, safety issues, and the failure to meet students’ individual needs.”
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