Charter Schools’ Administrative Costs At $128 Million

Arizona Governor Doug Ducey is pushing hard to dismantle traditional public education as fast as possible, and a report released on Tuesday by Arizonans for Charter School Accountability and the Grand Canyon Institute explains why. According to the report, the corporations running charter schools “have excessive administrative costs that never reach the classroom,” but that taxpayer money is going somewhere.

In the first ever of its kind, the report: “Higher Administration Charges of Arizona Charter Schools Cost Taxpayers $128 Million a Year,” calculates on a per pupil basis that Arizona’s charter schools spent $128 million more on administrative costs during the 2014-2015 school year than traditional public schools.”

Despite the efforts of some conservatives and liberals to equalize the reporting demands on publically funded charters and traditional public schools, only traditional schools are held accountable in any meaningful way for use of state funds. Charter schools “are largely exempt” according to the report.

“While Arizona’s public schools are required to justify every penny, charter schools are allowed to spend taxpayer dollars with insufficient accountability. This imbalance is unacceptable and harmful to Arizona’s teachers, students and parents. It’s time we demand that charter schools operate on the same level playing field as public schools,” stated Jim Hall, founder of Arizonans for Charter School Accountability.

Hall’s group argues that “Arizona‘s lax laws on charter school accountability combined with these schools being privately owned makes it impossible to see how excessive administrative funds are being spent. Money that should be invested into the classroom instead is redirected to administrative costs. These recommendations would do much to put public schools and charter schools on an even playing field and make sure Arizona’s taxpayer dollars are used responsibly.”

Key findings include:

1. Public districts spent an average of $628 per pupil for all administrative services. Charter schools averaged $1,403 per pupil, more than twice as much. If charter schools had the same administrative efficiency as traditional public schools, the state would save $128 million a year in administrative costs

2. The $775 per student administrative cost gap partially results from the smaller size of charters. Larger charter holders should be more administratively efficient. Instead the largest charter companies are among the most expensively managed agencies in Arizona. Their administrative costs are substantially higher, not lower, than the typical charter operation. If the seven largest charter holders spent the same on administration as traditional public districts, the state would save $54 million annually.

3. One of the largest charter companies, BASIS, Inc. (8,730 students) spends more on general administration than any charter or public district in the entire state, nearly $12 million. BASIS spent 30 times more per pupil on general administration than the six largest public districts combined (225,000 students).

Arizona State Rep. Mark Finchem stated, “When it comes to public funding of education there should be no area that isn’t open to transparency, disclosure and accountability. The dollars that pay for education aren’t government dollars -which of course don’t exist- they are in fact taxpayer dollars that are the given to government agencies, who must act as careful stewards. ‘Of he who is given much, much is expected;’ transparency is not too much to expect. in order for Legislators to know how our public education system is functioning, we have to be able to gage performance relative to spending. If there isn’t full disclosure on spending, we see a skewed picture, which ultimately leads to poor decision making. It is very much like making decisions on environmental controls when doctored data is presented as gospel fact regarding climate “change” data. I want to see normalized data from every area where taxpayer dollars are spent for public education.”

TUSD Governing Board member, and University of Arizona Economics professor, Dr. Mark Stegeman stated, “There is no justification for charter schools who survive on public funds to be so much less accountable for the use of those funds than the traditional public districts. Such a relentless commitment to hiding information usually indicates that there is much to hide.”

Public school advocate, and TUSD Governing Board candidate Betts Putnam-Hidalgo stated, “Now we know that trying to correct a lack of school district transparency is only part of the story. While the state makes every effort to send more money outside of the traditional public school sphere, there is even LESS tax accountability and MORE corruption there. Between the JTED debacle, the Proposition 123 proposal and the results of this report, Ducey’s desperate desire to be known as “the education governor” is misrepresentative at best, maliciously against young people at worst. Like the emperor, when it comes to education, Ducey has no clothes. These continued actions of educational malpractice are shortsighted and ill-informed: as he guts his public schools and hails charters, he makes a mockery of the kind of transparency and accountability that we must demand from all taxpayer funded educational venues.”

Retired public school teacher and advocate, Rich Kronberg stated, “The people who run most charter schools are the “owners” of the schools and run them on a for-profit basis. There would be nothing inherently wrong with that if charter schools were private schools, but they are publicly funded and should be held accountable for at least following state and federal laws related to public schools. Sadly for Arizona’s children, they have been allowed…by both state and federal officials… to ignore federal laws and exclude students for a variety of reasons that violate laws related to the obligations public schools have to admit and teach any student who wishes to attend…not just those who come from wealthy families or are motivated to achieve at the highest levels. If neighborhood public schools did what charter schools do and regularly exclude or expel students with learning or behavior problems the Arizona Department of Education and the Office of Civil Rights within the federal Department of Education would come down on them like a ton of bricks. In fact, if neighborhood schools were able to drop the bottom quartile of their students so they were teaching the same sort of students charter schools were teaching, they would outperform charter schools by wide margins. That was the finding of studies that equalized charter schools and neighborhood schools along demographic lines. But if charter schools were required to accept all students and follow the same rules every public school is theoretically required to follow, they would not do as well as neighborhood schools and the entire charter school industry would evaporate and blow away in the desert like so much dust.”

The report notes that the “largest corporate charter holders are among the worst offenders, while other charters do much better.”

Grand Canyon Institute Research Director, Dave Wells, noted, “The results of this study are very similar to one done in Michigan in 2012. Although we should see economies of scale with school operations. Both studies found that larger corporate charters that contract out to related for-profit management companies have higher, not lower, per pupil administrative costs. The seven largest companies spend $19 million more in administrative costs than if their spending matched the $1,403 per pupil average of charter schools—and it’s about 3 times what public school districts would spend for the same number of students.”

Arizonans for Charter School Accountability and the Grand Canyon Institute have three solutions to make corporate-owned charter schools more accountable to Arizona taxpayers:

1. Require charter school financial data to be collected and monitored by the Auditor General’s Office (just as they are for traditional public districts). The Arizona Board for Charter Schools should be required to use this data to investigate and sanction charter schools that misuse taxpayer dollars.

2. Charter management companies need to be transparent in reporting salaries and other financial information related to administration expenses.

3. Implement a public database that shows public districts and charter schools expenditures on administration and the classroom, so parents can make more informed choices when looking for the right school.

On Tuesday, the Arizona Senate Republicans and Democrats approved a bill pushed by Ducey to gut the office of Superintendent of Public Instruction and shift significant duties to the charter controlled State Board of Education.

Senators, who own interests in charter schools, did not recuse themselves from the vote.

11 Comments

  1. Let us play the game “corporation” a favorite American pastime. Ultimately, Arizona charter schools will be run by only a few firms, more than likely backed by Wall Street Hedge funds. This is no different from cable or phone companies. I am sure many of you are old enough to remember all of the different mom and pop cable companies in the early 80’s that were reduced to about 4 major corporations by the mid 90’s
    A lesson to be learned is that as competition decreases costs go up. The increased costs do go to increased services, but rather go toward increased dividend payments to shareholders and executive compensation. Services on the hand are decreased, you get less channles, but pay more money.
    The final cost is not derived from market place competition; prices are fixed through collusion of the large firms who will not compete with each other so as to prevent decreases in profits. The consumer is left not paying for the actual cost of the product in a world of healthy competition, the consumer is shoveling money like coal into a steam engine to feed greedy ceo’s and shareholders. On top of that the profits will not rest in Arizona, but will go to Wall Street.
    When competition rests in the hands of those final firms, your children will be placed in front of televisions watching “education” videos and the teacher working for $7.25 an hour will press the button on and off. Will you all not delight in the efficiency? Your governor will show you graphs showing teachers are not needed and that computers can do the job just as well, since he is nothing but the pitchman for Wall Street style public education.
    Good luck folks.

  2. As a teacher who has worked at various public and charter schools, I hope people understand that there are good and bad schools of all kinds. My children have gone to some excellent charter schools, but I habe worked at some charter schools where profit and test scores were placed above truly educating each child. I believe in greater accountability for charters, as many do play the game of getting rid of low performing students, often after the 100th day (when they are fully paid) and before the state tests in March and April. BASIS is notorious for sorting and selecting at many levels of the enrollment and education process. I know this from parents and teachers who I have spoken with. As a special education teacher, many charters prefer to remove or diminish services for children who need the most help, and if more parents knew the law and reported those violations to the state, it would perhaps change things. I worry about how many non-teachers are part of these decisions as well as people who are interested in sucking more money from the general educarion fund. As politicians think this is a great idea, there are kids with special needs that will not get the appropriate education because their school of choice did not provide what was needed or even “counseled” them out, rather than spend the extra money for an evaluation and an IEP. I had to pull my son out from his charter because some of these uncertified teachers refused to follow his IEP. Thank goodness that my neighborhood school did an excellent job, where this charter failed.

  3. Charter schools have to be held accountable for their administrative costs. This is tax payer money. Accountability for the tax payers’ money has to be a requirement, no matter who is spending it–public schools, charter schools or private schools. Ducey & company plan to give ever larger amounts of money to private schools via vouchers for every student. If the private schools get public money, then their finances need to be completely open to the public, too.

  4. Where public money is spent charters and district schools must be held to the same public scrutiny and sunshine laws.

    It’s not fair to say all charters are good or bad and same goes for district schools.

    To the comment about looking at graduation rates. She might be surprised that some of the Charters labeled the best graduate far fewer than start at those schools. No one bats an eye at the big difference between how many start vs. graduate.

    It is true charter schools don’t take every kid. In many families both parents have to work to make ends meet or there is only one parent. Those families depend on the school bus to get the kids to school. Look at those kids after school doing homework on their own because Mom and Dad are still at work.

    Family support is the biggest thing that makes a difference in a kid’s school life. It’s not the building or the label charter or district.

    Too many people make money off of school kids whether it’s the charter holders, the textbook companies, the test makers whatever.

    No one trusts our tax dollars are being spent wisely anywhere. Forget trying to look at the state budget to figure it out. It’s clear as mud. Better to keep the tax payers guessing.

  5. Accountability for Charter Schools should be improved. That said, the article focuses only on administrative costs. That information is almost useless without other information: what results do the charter schools get? If charter schools get about the same results as public schools, does that mean public schools should INCREASE administrative costs? Not what I’d conclude. Do charter schools and public schools use the same accounting procedures to compute administrative costs? Probably not but if not the comparison made in the article is dubious and their conclusions based on the comparison are silly. Especially conclusions such as: “the state would save $128 million” (That might be true but don’t hold your breath; the article provides no evidence.) We would need to know: What are the per pupil expenditures of charter schools vs public schools? How are the expenditures apportioned? What are the measured results obtained? Comparisons of charter vs. public school costs and benefits are both difficult and important; bad data add confusion.

    • The Administrative accounting standards for charter and public districts are identical. The report also compared the amount spend on administration relative to instruction–again an area that shuold be measured identically in both charters and distict schools. The key finding was that economies of scale were not present for charters and a Univ. of Michigan study found of their schools–charters and school districts found essentially identical results (Michigan like Arizona comparably funds district and charter schools). However, unlike districts schools, we don’t know where the administrative costs are going with charters-and that’s the key point in the study. One of charter chains singled out for exceptionally high administrative costs was BASIS, which has close to 9,000 students–and spends more on General Administration than the six largest pubilc school districts (225,000 students) combined. Something is going on there. Of course, BASIS has a great academic repudation, and I’d love to do an analysis of their performance-since they use an attrition-based model–about 150 students in 7th grade will winnow to 35 by the time they reach 12th grade. But that attrition model also helps you see how hard to do good output studies. Brookings –in partnership with the Goldwater Institute did as good a one as I think one can for ALL charters in Arizona–and found collectively they underperformed slightly relative to district schools–this was using student (as opposed to school) level data. However, the challenges they had in getting student level data (Goldwater had to threaten to sue) suggests the ability to do good output studies is going to be a challenge going forward. Please read our Arizona Study here: http://grandcanyoninstitute.org/higher-administration-charges-of-arizona-charter-schools-cost-taxpayers-128-million-a-year/ and the Brookings Study here: http://www.brookings.edu/research/papers/2014/11/06-chalkboard-arizona-charters-chingos-west

  6. It seems to me if “regular” public schools were doing their jobs right, parents wouldn’t be taking their kids out of public schools. My daughter’s charter school took my child in private school from a 2.5 GPA to almost 4.0 at graduation. They pushed calculus,algebra,computer,geometry and robotics among other subjects.
    She’s now at the U of A in her third year of college. This charter school was doing something right.
    So don’t be in such a rush to condemn all charter schools. They need to be audited individually. Look at the scores,graduation rates and spending.

    • You’re saying that a group that has twice as much money and has to spend nearly no time to accommodate problem children helped your child boost GPA. Sounds like a private school paid by public tax dollars.

      If taxpayers paid twice more taxes into the public school district, I’m sure they could come up with similar results as well. Maybe the state should rethink their priorities.

  7. Once again, I don’t see that their goal is to keep students from learning, but rather give parents a choice and stop the political indoctrination that the public schools have promoted the last 30 years.

  8. Charter schools are making tons of money off of public education without all of the restrictions. They don’t take the Special Needs, the unruly, nor the low performing and they shouldn’t take public monies if they are going to act like they are a private school. The State of Arizona sold their souls to their Charter School Cronies and Ducey isn’t going to stop until he has squeezed every last drop of blood from public education in order to privatize everything that is not nailed down. The goal is to keep students from actually learning anything or have critical thinking skills because they will not realize how badly they are getting screwed.

  9. The law firm running SW Center for Bio Diversity is run by filing suits for public money and no accountability is asked for.

    Did anybody address the fact that spending on education is reduced by using charter schools, tax credits and possibly vouchers?

    They perpetuate the monopoly that has failed America. Public schools.

    Take your social tinkering some place else.

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