Education, From The Capitol To The Classroom

Who Pays For Charter Schools And How?


If you look carefully in the upper left hand corner of the image, you can actually see SimSchool. Also, if you click on this photo, you can play SimCity. (Requires Internet Explorer)

As students head back to the classroom this year, many are starting at charter schools, an education option that’s become increasing popular in recent years for parents who want a choice in where they send their kids. But not all charters are created equal, and sometimes that disparity comes because of funding differences.

A few weeks ago, we brought you SimSchool. This was a hypothetical charter school which we created and brought before the chartering officials at Ball State University.  In that story, we told you all about the hidden costs of starting a new charter school. Now, a look at what it takes to fund a new charter school:

1.  Tuition Support

Under new legislation passed during the most recent session of the Indiana State General Assembly, the single largest source of revenue for a charter school is students.  Each student is allocated a base amount of about 46 hundred dollars from the state whether they attended a traditional public school or a charter school. Officials with Ball State’s Office of Charter Schools say the ideal number of students is between 250 and 300.  Schools with an enrollment in this range are hitting a sweet spot when it comes to maximizing dollars per student.  This can be a problem for schools in areas with low population density, where public schools may have fewer than 150 students.  These charters could have a difficult time syphoning off enough students to make the school sustainable.

2. Start-Up Grants

Both state and federal departments of education offer start-up grants to new charter schools looking for that initial funding needed to procure and renovate a building, establish a curriculum, hire and train teachers, buy furniture and equipment and just generally get the ball moving.  While these grants can total a substantial amount of money, in some cases, as much as two million dollars, this funding is usually only available for a school’s first two years of existence and often comes with a number of restrictions. Usually, these funds are distributed based on a school’s need and enrollment.

3. Categorical Grants

This is the single most complicated form of revenue in both traditional public and charter schools.  These grants cover extremely specific program cost.  In Indiana, for example, there are grants to cover vocational programs, special education expenses, full-day kindergarten, honors classes, and an enormous variety of other expenses.

Here is a break down of the major expenses involved in running a kindergarten program. SimSchool's full day kindergarten grant falls about 5 thousand dollars short of covering all of the programs costs.

This can get confusing.  For one thing, grants rarely pay the full amount of a program.  In the case of full day kindergarten, SimSchool qualified for about 50 thousand dollars in full day grant funding.  Hiring a full time teacher to teach this class cost more than 42 thousand dollars in salary alone.  This means that accepting or applying for a grant involves making a long term commitment to a program which could cost more than the value of the award.  In some case, turning a form of revenue into an expense.

Many charter schools also receive money through the federal Title 1 program.  The amount of this funding is based on the total number of students in either special education or on free and reduced lunch.

4. Charity

Sometimes, this comes in the form of large contributions from enormous endowments like the Bill and Melinda Gates Foundation.  In other cases, charity comes in the form of in kind donations like materials, supplies or even basic services.  One real charter school, Rural Community Academy in Greysville, Indiana, depends extensively on volunteers to mow the lawn, make basic repairs, and do some of the cleaning.

In rural areas, fundraising can be a problem because there is a much lower concentration of charitable money available.  This means charter schools in these areas are extremely dependent on donations of resources and labor.  In some cases, rural schools even count on volunteers to provide what many would consider basic classroom programing like teaching music and art.

The last major source of charitable donation comes in the form of what is called credit enhancement. There are a number of large organizations which will cosign on loans, so that charters can borrow whatever additional funding the school might need.

Revenue was a persistent problem in the creation of SimSchool.  Because of the splintered nature of many of grants and awards, we often found ourselves in a situation where we had too much money funding one program, while we were having to borrow to fund another expense.  At the same time, we were force to make many choices when it came to accruing debt.  Do we take out a mortgage so that we can pay for our school building over time or do we completely drain the coffers our first years and hope that we raise enough money to stay open our second year.  There are many different approaches to these problems, but underlying it all are the same basic pools of resources.  The biggest challenge comes in constantly searching for a way to make ends meet.


  • Hume

    Charter schools are not a solution to anything and they undermine the existing public education system. Parents need to support their local schools, meet their teachers, engage in school activities other than just football, and stay on top of what their kids are doing, and know the curriculum and homework assignments. And rather than attacking teachers and all things to do with government, the modus operandi of the anti-intellectual right, we need to put more resources into public education.

    • Bachvilla

      Well said!

    • Easyp420

      Don’t think So. I got involved in why the homework my children got didn’t make since and had nothing to do what they were covering in class and the teacher explained to me that she never sees the homework and that another teacher copies it for her and then she blindly gives it to my child not having a clue what it is. So yes. I am going to blame the incompetent teacher. Hows that for involved. Then I moved schools and this teacher it too lazy to give homework. She said it takes too much time out of her day to grade it. Yup, Thats the wonderfull education that my children get.

      • Arcwraith

        Unfortunately in any industry, like teaching, you have bad employees. Look at the big picture. Charters under-fund Publics by sharing the same tax dollars. Charters are unregulated, thusly teachers do not always have to be certified and are often underpaid, if paid at all, and over worked in abusive settings, and are not guaranteed health benefits. Charters Get free money to start up (also from the ed budget paid by taxpayers). They get a 39% tax refund (also from the ed budget paid by taxpayers). They get capital per student (also from the ed budget paid by taxpayers) and if the student doesn’t perform well, that student is kicked out after the CPS is locked down (usually in November). 46% of charters perform at the same level as Publics and 37% perform below standards leaving a paltry 17% across the nation that excels and the gains are insignificant. Most charters are owned by wealthy 1%ers and are quick, easy, and abusable cash grabs.

    • alex

      this is what works with the charter schools. the public school system answers to the gov bureaucracy, not the parents. this is why the system has failed. carter started the dept of ed, the beginning of the end for quality education in our states. its an inept, corrupt gov bureaucracy that is likened to the infamous failed gov program, “cash for clunkers”. the proof is in the results. public schools are graduating illiterates. parents should have a choice in educating their children. the parents have spoken. they want charter schools.

  • Ken Hinzman

    You can cut nearly $20k off the teachers salary – at least around the Detroit area. They usually try to hire “permanent substitute teachers” for about $90 – $100 per day. All they care about is that you have some college credit. From what I gather, I think they prefer you to not have a teaching certificate so they can keep you on at the reduced cost.

    • Arcwraith

      They have temporary teachers with 3 weeks of teaching training occupying classrooms all over the country for 2 year contracts who get preference over contracted teachers in low performing schools. Look up Teach For America and see the biggest threat to public education.

  • alex

    public education system is a dismal failure. it has no accountability. they spend millions & have little positive results. the foundation is rotted out. the schools answer to the gov & not to parents, their one size fits all approach to education doesnt provide for those that need extra help as well as those who are gifted. they throw more & more money at it & its still failing. the NCLB act-total fail. americans should have the choice of charter schools for their children. average students from the US public schools are way behind many other countries students. parents want charter schools. the gov does not. that tells the story.

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