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Pennsylvania Education Secretary Calls for Funding Changes for Cyber Charter Schools

Posted on: Tuesday, 31 July 2007, 17:06 CDT

HARRISBURG, Pa., July 31 /PRNewswire-USNewswire/ -- Education Secretary Gerald L. Zahorchak today called on the General Assembly to re-examine the commonwealth's funding formula for cyber charter schools.

In testimony presented before the House Education Committee, Secretary Zahorchak proposed establishing a single statewide cyber charter tuition rate based on the most efficient and effective cyber charter school's actual expenditures.

Such a funding system, he said, would help ensure taxpayer dollars are used more responsibly and equitably. In addition, he said such a system would lessen the likelihood that cyber charter schools can build up excessive, undesignated, unreserved fund balances.

"The department believes that in too many cases, Pennsylvania taxpayer dollars are not going for their intended use," Zahorchak told the committee. "Simply put, cyber charter schools should be investing their resources in students -- not building massive fund balances. That is why we support legislation that creates a rational and equitable system for funding cyber charter schools."

EDITOR'S NOTE: A transcript of Secretary Zahorchak's testimony follows. Testimony of Dr. Gerald L. Zahorchak Deputy Secretary, Office of Elementary and Secondary Education Pennsylvania Department of Education House Education Committee Informational Meeting on Cyber Charter School Funding

Good afternoon, Chairman Roebuck and Chairman Stairs, Honorable Committee Members, friends and guests. I am Dr. Jerry Zahorchak, Secretary of Education. On behalf of Governor Rendell and the entire Department of Education, I want to thank you for the invitation to appear before you today.

The Department is committed to supporting all students across the Commonwealth to help them achieve academic success. As a public school option, charter schools serve approximately 55,000 students in 117 schools, or about 3% of the total children enrolled in Pennsylvania schools. "Brick and mortar" is the term commonly used to refer to a traditional charter school that is authorized to operate by a local school district in the Commonwealth. For the 2006-07 school year, there were 106 brick and mortar charter schools, serving approximately 40,000 students. The remaining 11 charter schools are cyber charters.

In 2006-07, there were approximately 15,838 Pennsylvania students enrolled in cyber charter schools.

Cyber charter students come from 497 school districts, but the majority of cyber charter school students come from fewer than 20% of the Commonwealth's school districts:

-- 54 school districts reported enrollment of 1-5 cyber charter students; -- 74 school districts reported enrollment of 6-10 cyber charter students; -- 154 school districts reported enrollment of 11-25 cyber charter students; -- 188 school districts reported enrollment of 26-75 cyber charter students; -- 23 school districts reported enrollment of 76-150 cyber charter students; and -- 4 school districts reported more than 150 cyber charter students (Reading SD, 163; Pocono Mountain SD, 169, Pittsburgh SD, 531; and Philadelphia SD, 1,551).

In our technology-driven economy, there is no question about the importance of distance learning and computer-based instruction as educational tools. Cyber schools can certainly serve a positive role in this context, and the state has taken other steps to become a national leader in using technology to improve teaching and learning -- most significantly through the $200 million Classrooms for the Future program that is putting Internet- equipped laptops on every high school desk in English, math, science and social studies classrooms. Other legislative initiatives, such as Republican Leader Sam Smith's call for a bipartisan commission to study the creation of a statewide online high school, also hold the potential for real progress.

I hope that our discussion today can therefore focus not on the merits of cyber education, but instead on our responsibility as state policy-makers to ensure appropriate governance of cyber charter schools. Specifically, I would ask that you consider two key questions:

1) How should cyber charter schools be funded?

2) How do we ensure that cyber charter schools are accountable to the Commonwealth's taxpayers and to the students and families these schools serve?

Let me begin by providing some background information on the current status of cyber charter funding and the need for change:

Despite dramatically different cost structures, cyber charter schools are funded in the same way as "brick and mortar" charter schools. The school district of residence for each cyber charter student is required to pay the cyber charter a per-student rate based on the school district of residence's own costs. Please note that the school district of residence is responsible for providing payment to the cyber charter school regardless of whether the student had previously been enrolled in the school district, a private school, a home school program, or another school. Also note that there is incredible variation in school district tuition rates. In 2005-06, tuition ranged from a low of $5,200 for students from the Reading School District, to a high of $13,000 for students from New Hope Solebury School District. The Commonwealth reimburses school districts for up to 30% of their charter school payments, with state reimbursement totaling more than $160 million this year.

As a result of this formula that bases payment on the resident school district's tuition rates, the amount spent to educate cyber charter school students varies from one cyber charter school to another. In Pennsylvania, cyber charter schools spent between $6,881 and $12,614 per student in 2005-06, according to the Annual Financial Reports submitted to the Department. As recently noted by the Task Force on School Cost Reduction, established under Act 1, "cyber charter schools attract students from across the state, and given the great variance in school district expenditures in the commonwealth, there is also a great variance in the tuition paid to cyber charter schools ... this means that students attending the same cyber charter school can bring with them two very different funding streams."

As submitted in the 2005-06 Annual Financial Report, Pennsylvania's 12 cyber charters expended only $106 million, while collecting $117 million -- a difference of more than $800 per student. Fully one-fifth of Pennsylvania school districts have to spend less per student than the cyber charter schools collect in per pupil revenue -- despite the fact that cyber schools do not face the same costs as brick-and-mortar schools. At the end of 2005-06, cyber charter schools also had a cumulative unreserved fund balance of $28 million - or 26% of their annual expenditures. For comparison purposes, Act 48 of 2003 prohibits school districts of a comparable size from raising taxes if their unreserved fund balance is more than 12% of their annual expenditure level.

The Department believes that in too many cases, Pennsylvania taxpayer dollars are not going for their intended use. Simply put, cyber charter schools should be investing their resources in students - not building up massive fund balances. That is why we support legislation that creates a rational and equitable system for funding cyber charter schools.

Throughout the spring, we worked on a legislative proposal to improve Pennsylvania's cyber charter school funding system, which I forwarded to all members of this Committee and to your colleagues in the Senate. The urgency of this task was reinforced by a report in June by the Auditor General, who studied three charter schools and found that "the fact that all three charter schools were legally entitled to receive more funding than they needed to educate students underscores the critical need to fix the state's Charter School Law immediately."

We propose establishing a single statewide cyber charter tuition rate based on the most efficient and effective cyber charter school's actual expenditures that would allow taxpayer dollars to be used more responsibly and equitably. Local taxpayers would save tens of millions of dollars without impacting the quality of education delivered by Pennsylvania's cyber charter schools. Furthermore, it ensures that cyber charter schools will be held accountable for their spending in a similar manner to public schools. The single rate will lessen the likelihood that schools will build up excessive undesignated, unreserved fund balances, and provides that in such cases where the limit might be exceeded, that the excess be returned to the school district paying tuition to that cyber charter school.

The establishment of a single tuition rate for cyber charter schools is imperative if we are to create a fair and equitable tuition system to support this educational option. In its recommendation to establish a single statewide cyber charter tuition rate, the Task Force on School Cost Reduction wrote as follows "establishing a single statewide tuition rate will enable all school districts to pay an equitable share of the costs to support the cyber charter school that the resident student chooses to attend ... Setting a single tuition rate is a critical component of allocating public resources efficiently."

In setting the tuition rate, we believe that both the underlying cost structure of the cyber charter school as well as the resources needed by the school to ensure appropriate levels of student achievement should be taken into consideration. For this reason, we propose setting the tuition rate to reflect actual expenditures of the cyber charter school that has historically both met adequate yearly progress targets and spent most efficiently. By setting a tuition rate in accordance with this principle, school districts will be assured that they are paying an equitable share of the tuition costs for students.

Similarly, capping a cyber charter school's unreserved, undesignated fund balance ensures that cyber charter schools would face the same limits that school districts currently operate under. Moreover, it provides assurances that should the single tuition rate overestimate the cost of doing business to a cyber charter, that the excess revenues will not be kept by the cyber charter, but rather returned to the home school district to support their entire educational program. In this time of scarce financial resources and overburdened tax bases, it is imperative that we restructure the manner in which we fund these important educational options to ensure their sustainability and the fiscal solvency of our 501 school districts and the communities they serve.

Thank you again for the opportunity to discuss this issue with you today. I hope that the Committee is able to send meaningful cyber charter funding reform to the full House when the General Assembly returns in September so that we can adopt a solution that will be in place in time to be implemented for the 2008-09 school year.

CONTACT: Michael Race

(717) 783-9802

Pennsylvania Department of Education

CONTACT: Michael Race of the Pennsylvania Department of Education,+1-717-783-9802

Web site: http://www.state.pa.us/

Source: PRNewswire-USNewswire

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