Charter Smarter

Capitol Building in Jefferson City, MO.  ID’d by Dave Hansel

Having served as attorney for over a decade for two of Tulsa’s original charter schools (Deborah Brown and Dove Science Academy) and as CFO for a decade with the Sand Springs Public Schools, naturally the Tulsa World article last week announcing that the Oklahoma Charter Schools Association had filed suit against the Oklahoma State Department of Education to secure more equitable financing for charter schools caught my attention.  Here is the Charter Schools Lawsuit petition.  Additionally, my son Ethan and I were plaintiffs, he as a student and me as a school board member and taxpayer in Fair School Finance Council v State of Oklahoma, decided in 1987, which unsuccessfully challenged the then inequitable system used to finance Oklahoma’s school districts.  Even though the litigation was unsuccessful the legislature, beginning in the 1980s and culminating with House Bill 1017 25th Anniversary, see also Once Upon A Time, put in place our current State Aid Formula that I think works pretty well in equalizing state support for our school districts.  What follows is my attempt to provide information that will be helpful in any reconsideration of how Oklahoma’s public charter schools are financed.

The basic framework is in Title 70, specifically the Charter School Act, Section 3-142, which provides that the state revenue for charter schools is calculated the same way as it is for school districts, subject to as much as 5% being kept by a charter school sponsor for its services.  Additionally, charter schools can apply for all the same state and federal grant revenues that are available to school districts.  So what’s the lawsuit about?  Actually I don’t want to comment on the legal arguments set forth, but rather focus on financial facts.  The numerical examples given in opening paragraphs 11 and 12 are the only factual demonstration of inequality cited in the petition so most of this post focuses on that.  What is alluded to, but not demonstrated in the petition, is the fact that the State Aid Formula only seeks to address inequality among the General Fund revenues of school districts; it does not address inequality among school districts with respect to their Building Fund and Sinking Fund capacities and charter schools do not have access to these significant revenue sources that are provided for by the Oklahoma Constitution.  

Look at my Charter Smarter Chart way below.  The petition uses the State Department of Education’s Annual Report as its data source, which is shown in top section of the chart, for its allegation that for the 2013-2014 school year “the total revenues received by the Oklahoma City Public School District (OKCPS) less federal funds was $242,502,928.  The revenue per Capita by weighted ADM was $3,588 (e.g., per pupil funding).  Whereas, ASTEC charter school located within the boundaries of OKCPS has a total revenue received less federal funds of $661,095.  The revenue per Capita by weighted ADM was $501 (e.g., per pupil funding).  The charter school received approximately $3,087 less per student.”  It then goes on to state that the Tulsa Public Schools revenue per Capita that year was $3,827 whereas the per Capita revenue for Deborah Brown charter school in Tulsa was $3,126 which is $701 less.  The Annual Report numbers are clearly for only school districts’ and charter schools’ General Funds, not Building, Bond, Child Nutrition or Sinking Funds.

The TPS to Brown comparison is believable on its face but the OKCPS to ASTEC comparison doesn’t pass any test of believability so I went to the OCAS data for each of the four entities to compare with the Annual Audit data.  My Charter Smarter Chart below shows what I found.  OCAS reporting is done by code numbers for revenue sources.  1000s are local sources, 2000s are county sources, 3000s are state sources, 4000s are federal, 5000s are essentially in/out correcting entries, i.e. bookkeeping offsets that don’t represent actual new revenue, and 6000s for funds carried forward from prior years.  OKCPS, TPS and Brown all had two entries for 3200s, namely 3210 for state aid (the Formula) and 3250 for employee health insurance (revbrown, revtul, revokc); ASTEC had only the 3250 entry for health insurance and nothing for state aid, 3210 (revastec).  I looked at the ASTEC Formula state aid allocation sheet and it clearly shows they were to receive $4,000,693 that year.  So what happened to it?  Look at their entry for OCAS revenue code 5800 (defined in OCAS manual as “5800* CHARTER  SCHOOLS.  Revenue received for per capita costs as provided by the district.”) which is $3,974,411.41.  It doesn’t equal their prescribed allocation but is 99.3% and remember the school district may keep up to 5%; note that Brown’s 3210 entry is exactly 95% of their Brown Formulastate aid allocation which means their sponsor Langston University is retaining the full 5%.  After this adjustment is made the ASTEC per Capita amount becomes $3,513 and the difference with OKCPS melts away.

Now that we have apples to apples and believable numbers for all four we can proceed.  I fully agree with the lawsuit plaintiffs’ decision to exclude federal funds from the calculations since the state can’t control their allocation.  In my opinion there are other sources that should be excluded as well.  In the 1000s, local sources, I think it only makes sense to include local property taxes.  The other sources are categories like contributions (nice people giving money), sales of assets (old desks, buses, etc.), rental payments (private dance recital in the auditorium), interest earnings and much more that rise and fall year to year, are often associated with offsets, i.e. greater custodial expense to clean the auditorium after rental, and vary widely from district to district.  Including these in a discussion about inequality is very problematic.

In the 3000s, the 3300s are for child nutrition; some school districts and most charter schools report their school nutrition financials in their General Funds, but most school districts do not.  Every student has the same entitlement to federal and state support for the school nutrition programs so including anything related to it will distort the comparison the plaintiffs are seeking.  The 3500s to 3800s are for programs like Alternative Education, high school remediation (ACE) programs and Career Tech which have specific requirements and are almost all secondary level programs.  Secondary charter schools can avail their students of these services; comparing a TPS that includes these secondary programs to a Brown that is an elementary school is not apples to apples.  Therefore, my next section (subtractions) recalculates the per Capita or per WADM amounts using only the remaining revenue sources.

Finally, under “true state aid”, I remove all revenue sources for which both school districts and charter schools are either already entitled to receive based on some fair measure, like student population (3433 text books) and number of employees (3250 employee health insurance) or for which they can apply on an equal basis.  What is left are the revenue sources, property taxes and state dedicated revenues (1100s, 75% of 2100, 3110, 3120, 3130 and 3140) that are expressly accounted for in the formula, and a handful 2200 (county mortgage tax), 2300 (county repurchase fund) and 3150 (vehicle tax stamps) that are paid to school districts with no strings, or entitlement other than statute, attached.  Including only those revenue sources brings us to my final grouping a bottom line calculation that a more apples to apples comparison among the four entities listed in the Petition is OKCPS  , ASTEC  , TPS  , and Brown  .

This last part may make little sense if you have not learned how the state aid formula works, and if you haven’t you are not alone.  One statement I’ve run across on the Oklahoma Council of Public Affairs website, or in a publication referenced there, is by Martin Lueken of EdChoice   in his paper “Tax Credit Scholarship Audit” where he opines, “ These funding formulas are highly complex. In the school finance world there is an adage about individuals in each state who understand these formulas: You can count them on one hand.”

My experience with the House Bill 2244 fiasco which you can read about in these posts, A Turkish de Fright  and ‘Twas the Night Before Sine Die  , convinces me there are few if any in the legislature, or even their staffs, who understand it.  Otherwise why would they remain clueless for over a year and a half while some $20 million was shifted from over half the state’s school districts to the remaining 150 or so?  Then they completed the folly, wholly fixable and avoidable, this last session by changing motor vehicle collections allocations going forward without any compensating offset in the formula, assuring that “loser” districts will again fall way short next April while “winner” districts pocket a final month of gain.  You see those revenue sources that are included/charged in the formula are calculated not in actual collection amounts but by current valuation for property taxes and by prior year collections for the rest.  If there is a disconnect then school districts bear the win, more collected than predicted, or the loss, less collected than predicted.  Charter schools do not get to play this game, a fact that prevents them from being winners, but also protects them from losses like the motor vehicle collections fiasco which has cost TPS over $3 million. 

The revenues, 25% of 2100, and all of 2200, 2300 and 3150 source codes, that are without strings attached and available for any general fund purpose, are not available to charter schools.  Likewise, charter schools bear an up to 5% loss in state aid for their sponsor’s services.  The gap between TPS and Brown per WADM amounts largely disappears if the 5% is restored (it becomes $3032).

I doubt these discrepancies are sufficient to gain much interest regarding equity within the state aid formula among school districts and charter schools.  The real discrepancy in funding has to do with the lack of access by charter schools to financing like what school districts have through their Building and Sinking funds.  In effect most school districts can finance the costs of having and operating their schoolhouses without significant impact on their general funds, though those capacities vary widely among districts.  Charter schools on the other hand start with at least 5% less in operational funding through the formula and other sources and the first expense they bear is to rent or otherwise acquire a schoolhouse.  I think most charter schools do not have significant transportation costs which offsets some of the discrepancy caused by not having a building or sinking fund, but it doesn’t make up for all of it.  Those funds are established in our Constitution and are not really within the purview of the State Department of Education, the only defendant in the litigation, to affect.  Perhaps more about that in a later post.

As always lunch is on me for the first to ID the photo location.  ID’d by Dave Hansel

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