The Business of Charters From Another Perspective

Doug Hering, the Chief Financial Officer at The Classical Academy, has been blogging about a charter conference he's attending at Harvard this week. It sounds like participants and presenters have wrestled with a number of philosophical issues relating to charters such as performance pay, budget priorities, educational philosophies and charter school laws. I've heard from people who have attended this conference in the past and while it's expensive, it is very worthwhile.

Yesterday's post mentions a discussion the group had about how public funds are used in charter schools.

The case involved a Denver charter that was saving money for a down payment on a
building. A parent found out after about three or four years when the fund
balance hit about $2.6 million in a school with revenue of about $5 million. The
saving was board approved, but the parent and many teachers wanted the money
spent now. There were many complicating factors in the case, but the ultimate
question is what is fair to current staff and students? Can a school withhold
money from the current allocation to spend on a future building?

Charter schools must use their per pupil funding for facility costs, in addition to operating costs. In fact, some charter schools spend up to 30% of their Per Pupil Revenue on capital needs. This is quite different than most public, district-operated schools that have access to taxpayer-generated bond money for capital purposes.

It's rare when a brand new charter school can get facility financing. Most lenders want to see a good credit history over a three-year period and steady enrollment demand before they're willing to fund charter school capital. In order to prepare for financing, charter schools must put away money to use for a down payment and the costs associated with making the financial arrangements (e.g. bond/legal counsel).

Most people examining financial "big picture" issues for a charter school first consider if large budget categories are within reasonable margins. There are average percentages for salaries, capital and general operating expenses. Next, a comparison of charter school salaries with the district's salaries is recommended. Charter school leaders shouldn't feel a need to have salaries within a certain percentage as much as they should analyze similarities and differences between job descriptions. For example, many charters use aides in the classroom, which alleviates the teacher's need to take home papers to grade and maintain student files. For many teachers, this is a worthwhile trade-off for a little less pay.

The solution to fairly compensating charter school teachers is not in recreating a step and level chart, such as is used by most districts where years of experience and degree level are considered. Rather, charter schools factor in adherence to the charter school's instructional philosophy and outputs such as student academic performance.