School FinancingShannon Meeks is the Chief Financial Officer for Putnam City Schools.

Each year in late December, state aid payments to public schools are adjusted based on changes in student enrollment and local tax revenues during the first part of the school year. This December, at a time when all of Oklahoma’s public schools are desperately hurting for funds, a staggering 69 percent of the state aid released at midyear ($17.7 million out of $25.7 million) went to charter schools rather than traditional public schools. Charters received more than two-thirds of this state aid adjustment even though they account for only 2.8 percent of public school enrollment.

What enabled charter schools to receive the lion’s share of midyear state aid? The answer is found in Oklahoma’s complex funding formula for schools that was created before charter schools were even a gleam in the eye of Oklahoma legislators. In particular, you need to understand one concept in the state’s formula for funding public schools: equalization.

Oklahoma uses an equalization model in which state aid is taken from the locally-affluent districts and given to the less locally-affluent districts. Local affluence is measured through selected local revenue sources unique to each district, such as property taxes, county 4-mill levies, school land earnings, and collections from gross production and motor vehicle taxes. The equalization model reduces each district’s state aid base if it has a high amount of local revenue and increases the state aid base for districts with a low amount of local revenue.

However, charter schools don’t receive local revenue like traditional school districts. So as state aid moves from districts with high local revenues to districts with low local revenues, charter schools are at the front of the funding line.

The equalization model has withstood legal challenges and is often lauded as the ideal approach to school funding because it evens out funding between wealthy and poor cities and towns. The problem is that charter schools were in not in existence when the equalization model was developed, and their inclusion has broken the system.

Take a look at the chart below, which presents a pre- and post-equalization picture.

charter_school_funding2

The chart makes it clear that that charters benefited greatly from the equalization process. Based purely on enrollment, charters would have received $9.2 million of the midyear adjustment. However, equalization brought them another $8.5 million, moving their share of the midyear release from $9.2 million to $17.7 million.

Of the $8.5 million extra dollars in equalization tolls collected by charter schools, roughly 67 percent went to virtual charters:

  • Epic One on One Charter School: $4,100,000
  • Oklahoma Virtual Charter Academy: $794,000
  • Oklahoma Connections Academy: $778,000

It’s clear that the equalization process benefits charter schools at the expense of traditional public schools – probably far more than most people might have imagined. In order to prevent this disruption in the equalization process, charter schools should be rolled into their home district’s state aid calculations. Then the home district can pass along the charter’s share of state aid as received. With this process, we can equalize state aid using a fairer consideration of the actual “local affluence” of  charter schools.

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