|Public Schools are Pinching Pennies while Cyber Charters are Rolling in Cash
While the General Assembly was busy passing a bill this week to protect charter school interests, the PA Charter Performance Center released a report showing that cyber charters have lawfully stockpiled millions of taxpayer dollars with zero accountability.
PA’s 14 cyber charters have a total surplus of $164 million. Because Pennsylvania law exempts charter schools from financial regulation, the total cyber surplus grew seven-fold over the last two years. This increase was unique to cyber charters, whose unassigned fund balances grew nearly 10 times faster in 2020-21 than school districts.
“It is one thing to ask taxpayers to support higher taxes to enhance the educational opportunities for local students. It is another proposition entirely when their tax dollars end up as unregulated funds controlled by statewide cyber charter schools,” said ML Wernecke, Director of the PA Charter Performance Center, a project of Children First.
The spike in surpluses cannot be explained by rising cyber charter enrollment over the last two years. Cyber charter surpluses rose nearly 647% – over ten times the 63% increase in enrollment. Using the state standards applied to school districts, 11 of 14 cyber charters are holding excessive surpluses.
State law caps school district surplus at 8% to prevent a district from building up excessive reserves and to protect local taxpayers from unnecessary property tax increases. Because cyber charter schools don’t have to play by these rules, there is no limit on the amount of surplus a cyber charter school can generate nor rules on the use of excessive surpluses.
“The bottom line is that cyber charters are stockpiling dollars that should either be used to improve student outcomes or be returned to taxpayers,” said Wernecke.
To address such misuse of taxpayer funds, the Pennsylvania Department of Education (PDE) passed regulations in March that, among other things, require school districts and charter schools to follow the same fiscal management and auditing standards. Legislators with close ties to the cyber charter industry passed a bill to override those regulations, which Governor Wolf is expected to veto.
Eighty-six percent of school districts across the state – 434 out of the 500 – have passed resolutions asking state lawmakers to enact reforms that would stem the stockpiling of taxpayer funds by cyber schools and end the cyber tuition payment practices that lead to these eye-popping surpluses.
In addition to supporting the new PDE charter school guidelines, the PA Charter Performance Center recommends:
- the Legislature pass statutory limits on cyber charter fund balances,
- the PA Auditor General audit every cyber charter every three years,
- the PA Department of Education use the charter school renewal process to hold underperforming schools accountable, and
- the Legislature pass cyber charter funding reform that would standardize cyber tuition and require that school districts and charter schools use the same special education tuition formula.
The report, Pennsylvania Cyber Charters are Stockpiling Funds that Should be Spent on Students or Returned to Taxpayers, is available online.