Tuesday, July 17, 2007

Charter's Financial Management Questioned

In Allentown, PA, the parents and student of Roberto Clemente Charter School have much to be proud about, but the The Morning Call thinks their austere financial management is wasting taxpayer dollars. The Pennsylvania charter school law requires the school districts provide the charters with the same funding in most categories as they would for a traditional public school. Like most states, Pennsylvania's law is not a full 100% equal funding for charters, but pretty close. Like a lot of charter schools, Roberto Clemente Charter manages its funds much better than traditional public schools, resulting in a nearly $475,000 surplus in its coffers. There are no allegations of wrong-doing on the part of Roberto Clemente, according to the story,
but the size of the overpayment shows a serious need for reform. [State Auditor Jack ]Wagner called on the Legislature to standardize the funding system for the state's 119 charter schools and 11 cyber charter schools. We agree.

Roberto Clemente has kept about 20 percent of its annual budget in a reserve fund for capital expenses and budgetary shortfalls -- on the face of it, good management. But public school districts' savings are capped by law at about 12 percent of their annual expenditures.
There are a couple of issues at play here, and I don't have all the facts underlying the case, but allow me a couple of assumptions.

Assumption #1, Roberto Clemente had to find its own spaces to operate and may be paying rent for those places.

Assumption #2, the Allentown public school district is embarassed by the ability of a charter school to manage money better than the school district. This embarassment is felt by elected officials all over.

Assumption #3, the operators of Roberto Clemente decided that a rainy day fund was better financial management than willy nilly spending.

On the savings cap score, my belief about charter schools and the point of charter schools, was to free them from some of the bureaucratic struggles that traditional public schools had to endure. One could logically infer that the 12% savings cap would be one of those rules from which the charter school was exempt. The Charter School Act does not mention the savings cap and the regulations may not as well, thus Roberto Clemente Charter simply figured, not illogically, that they were exempt.

But let us assume that the charter schools are not exempt, do we know that the surplus accumulated by Roberto Clemente Charter is not under the 12% cap? The Morning Call article noted that the school accumulated a surplus of $475,000 over three academic years, that comes to just over $158,000 per year. Was that number over the cap? Another alternative of the charter school is to simply reinvest enough of it surplus back into the school, in terms of technology, books, supplies, salaries, capital improvements or whatever to ensure that its savings rate is 12 percent.

What disturbs me the most though is that everyone thinks the solution is to limit the funding to charter schools. Charter schools vary in their funding needs, based on location, salary conditions, facility needs, and most importantly the needs of their students.

The Morning Call believes the charter school funding law is at fault for Roberto Clemente's funding surplus. However, could it be that the spending process at the public school system is at fault? One could easily make the argument that if one small charter school could wisely spend money, successfully educating students with smaller per pupil expenditures, then a larger school district operating on an economy of scale should be able to do so as well. But I would wager that the school system's operating budget is bloated by administrative costs, costs that a charter does not incur, and costs that the school district doesn't really need.

But no one, the Morning Call or the elected leaders named in the article, appear to have thought about putting tighter financial controls on the public school district. If one charter school can save $475,000 over three years, imagine what the 17,300 student public school system could do with a much larger budget.

For so long political leaders have assumed a generally hands-off attitude when it comes to school spending. Although budget increases are not without question and some lip service is paid to proper spending, in reality little is done to ensure that spending is actually achieving the school's mission--that of educating kids.

Instead of "reforming" the charter spending formula, maybe the Allentown schools would be better served asking the Roberto Clemente leaders how and where they achieved such cost savings while succeeding in their mission.

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