News Story

Contrary to Report, Charter Schools Get Less Money Per Pupil Than Conventional Schools

Media runs with faulty claim that charter public schools at fault for conventional schools financial problems

Michigan charter public schools have "generous" state funding and pose a growing risk for urban public school districts that are under financial stress, according to a Moody's Investors Service October 2013 report.

Yet, charter public schools receive $691 less per student in state and local funding than conventional school districts, on average. And that gap can climb as high as $2,500 per student in urban districts, according to the Michigan Department of Education.

However, Moody's description that charter school funding is "generous," even though it is less than conventional districts, raises the question of whether the financial stress those urban districts are under is a revenue problem.

Charter public schools face the same student flight issues as conventional schools and receive less money than their conventional counterparts, but they are far less likely to be in deficit, said Audrey Spalding, education policy director of the Mackinac Center for Public Policy.

For example, there were 51 conventional public schools districts (9 percent of the conventional districts) that were in deficit or were projected to be in deficit in 2013, according to the state. However, only four charter public schools (1.5 percent of the number of charter public schools in Michigan) were in deficit or expected to be in deficit in 2013.

"Charter schools face the threat of closure if they can't balance their books and I don't think it has really hit home for conventional school districts that that is the reality," Spalding said.

Most urban conventional school districts get considerably more state and local funding than the charter public schools in their county, according to the state department of education.

In Ingham County, for example, the Lansing School District received $9,267 per student while the seven charter public schools in the county received, on average, $8,490 per student.

In Genesee County, Flint Community Schools received $10,352 per student while the 10 charter public schools in the county received, on average, $7,818 per student.

In Oakland County, the Pontiac School District received more money per pupil, $10,829, than each 16 of the charter public schools in Oakland County.

Moody's injected itself into the national debate on school funding with the report as national media such as the Washington Post picked up on the "charter schools hurting public school finances" narrative.

"At the end of the day, we consider ourselves observers to this situation," said David Jacobson, a spokesman for Moody's Investors Service. "Our primary responsibility is to correctly analyze the risk that Michigan school district bondholders will be paid back in full with interest, but we do not tell them how to invest and we do not get involved with buy/sell decisions, bond yields, credit spreads, etc. We also do not get involved with policy decisions involving public finance.

"We wrote this special comment because Michigan school districts are facing high levels of fiscal stress, and we have taken negative rating action on a large number of school districts in the state because of these issues. … Enrollment declines because of charter schools are one reason, but others are limited flexibility to raise revenue to offset state funding losses from those enrollment declines, demographics with a lower student population, and a growing diversion of revenue toward retirement costs."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.