John Hunt is an assistant professor of educational administration in the Department of Educational Leadership at Southern Illinois University-Edwardsville and has served as a teacher, principal, assistant superintendent and superintendent for 34 years in the public schools of Colorado, Missouri, Washington and Illinois.

During the 12-year-old public charter school movement in Illinois, the number of charter schools in the state has grown at a relatively slow, but steady pace. The January 2008 Illinois Charter School Annual Report puts the number of charter schools in Illinois for 2006-07 at 34, serving nearly 17,000 students, compared to an overall K-12 public school enrollment of 2,360,443 students … or less than 1 percent.

Clearly, Illinois charter school enrollment is quite small in the scheme of Illinois public school enrollment. Contrast this with a state with a much smaller student enrollment, Colorado. During the same 2006-07 school year, Colorado had nearly 140 charter schools, which educated approximately 55,000 students. According to Jim Griffin, the president of the Colorado League of Charter Schools, this constituted approximately 7 percent of the public school population in Colorado.

A similar 7 percent charter school enrollment in Illinois would equate to more than 165,000 students.

While charter schools have been criticized by some public school administrators and school board members for a variety of reasons, both philosophical and fiscal, a common theme has been a concern over the loss of funds that the home public school district is likely to incur when their resident students enroll in a charter school within the public school district's boundaries. Just what are the costs involved in Illinois?

Sources of funding

Of the 34 charters operating in Illinois in 2006-07, 27 were within the boundaries of Chicago Public School District 299. Four were in the metro-east area of southwestern Illinois: two in East St. Louis, one in Cahokia and one in Venice. The remaining three schools were in central Lake County, Decatur and Springfield.

These schools are allowed to negotiate the amount of funding they receive with their local board of education. In the case of the Prairie Crossing Charter School in Lake County, both Fremont SD 79 and Woodland CCSD 50 have been involved in this process. State law provides that the amount of funding received may be between 75 percent and 125 percent of the home district's per capita student tuition.

Because this is not the same as general state aid (GSA), sometimes these negotiations are contentious.

Both Districts 79 and 50 rejected the charter application for Prairie Crossing twice. Ultimately, the Illinois State Board of Education granted the charter in December 1998, and ISBE still holds that charter.

When Prairie Crossing applied to renew its charter in September 2003, both the Fremont and Woodland districts objected. Representatives from Fremont testified to ISBE that Prairie Crossing's charter should not renewed based on possible financial hardship placed on the district, past and future. Woodland's comments claimed Prairie Crossing "… is operating as an elitist school using public funds."

But ISBE ultimately renewed Prairie Crossing's charter.

In addition to receiving between 75 and 125 percent of a home district's per capita student tuition per enrolled student, charter schools initially also are entitled to start-up funds. These funds are in conjunction with the Federal Public Schools Start-Up Program and are made available to prospective Illinois charter schools through a Request for Proposal (RFP) available through ISBE.

This RFP actually is divided into three separate components — pre-charter planning, planning grants and implementation grants. The overall amount available in FY08 through this RFP was $3.5 million. The pre-charter planning grants range from $10,000 to $12,000 per year and up to 20 grants could be awarded. Up to five planning grants were available with awards between $50,000 and $75,000 per year. Finally, implementation grants of $150,000 to $200,000 per year were to be awarded to as many as 11 recipients.

Offsetting losses

Returning to Lake County, it should be noted that Woodland and Fremont districts received some Transitional Impact Aid (TIA) from the state to help offset funds lost to Prairie Crossing Charter School. Over the first three years of the charter, Woodland received $787,498 and Fremont received $201,615.

However, TIA funds are only available for the first three years of a charter's existence. While this level of TIA funding may appear to be substantial, an examination of one particular section of the ISBE report on Prairie Crossing's 2003 renewal application is illuminating.

Using the known FY04 per capita tuition rate (PCTR) for both Woodland and Fremont, and projecting the future PCTR for each district as well as the enrollments for the Prairie Crossing, ISBE included the following figures in its renewal report. (See chart)

In these figures, ISBE projected no increase in GSA. The number of Prairie Crossing students was prorated between Woodland and Fremont at a percentage of 85 percent for Woodland and 15 percent for Fremont, which had been the typical distribution until then. At the time of the Prairie Crossing renewal application, ISBE's practice was to provide the PCTR to charter schools by withholding the appropriate amount from GSA otherwise due to the school district.

An examination of these numbers shows that if the ISBE projections had played out accurately over time, then the PCTR due to the Prairie Crossing Charter School would have exceeded each district's anticipated GSA in FY08.

After analyzing the projections listed above, as well as other data, ISBE decided that the renewal of Prairie Crossing's charter would not create a "… most severe and intractable crisis" for either school district. This language comes from a 2000 legal opinion given to then-St. Clair County Regional Superintendent Jed Deets by ISBE attorney Respicio Vazquez.

In that opinion, Vazquez said, in part, "A charter school that is performing well academically and is otherwise complying with its charter has a right to expect its charter will be renewed in all but the most severe and intractable financial crisis for its chartering district. The elimination of a charter school should be a last resort rather than a standard option for a district to eliminate a budget shortfall."

However, Illinois charter school law does say that the terms of the proposal must be "economically sound for both the charter school and the school district … ." Perhaps with this in mind, the state board reviewed other indicators to determine whether the renewal proposal as presented by Prairie Crossing represented an economically sound picture for both affected school districts.

ISBE staff noted that both districts had received a rating of "Financial Recognition," the best rating of financial strength at that time. It also looked back to the previous fiscal year (FY02) and noted that the GSA funds diverted from Woodland to Prairie Crossing represent only 1.57 percent of the district's total operational revenues and 1.7 percent of Fremont's total operational services.

The Civic Federation, an independent, non-partisan government research organization in Chicago, released a report in July 2007 titled The Financial Impact of Charter Schools on Illinois School Districts: A Primer and Three Case Studies.

While this report addressed charter schools in general, it paid particular attention to three charter schools: Prairie Crossing Charter in Lake County, Robertson Charter in Decatur and Ball Charter in Springfield. This 112-page report contains a wealth of information. Among other things, it found that the four home districts of the charter schools (Woodland CCSD 50, Fremont SD 79, Decatur SD 61 and Springfield SD 186) all had operating deficits either the year prior to or the year in which their charter schools began to operate.

The report went on to say that all four districts eventually achieved operating fund surpluses while their charter schools were in operation, but these operating fund surpluses came about as a result of fairly severe budget reductions, successful tax referenda or both.

The Federation's report said that in 2003-04, Fremont District 79 contributed 2.4 percent of its operating funds to the Prairie Crossing Charter School and Woodland District 50 contributed 2.5 percent of its operating expenditures.

As a point of reference, both Decatur and Springfield contributed a smaller proportion of their operating funds to their charter schools, with Decatur sending 0.9 percent of its funds to Robertson Charter School and Springfield sending 1.4 percent of its operating funds to Ball Charter School.

The reality

It is one thing for an outside agency or federation to say that the fiscal impact of a charter school to a public school district will be neutral or minimal, and it is quite another thing to have to deal with the loss of those revenues. The loss of any GSA will have a fiscal impact on the districts affected.

In the 2003 ISBE renewal verbiage, the fact that both District 79 and District 50 had achieved ratings of "Financial Recognition" was touted. There is often a public perception that districts with relatively high equalized assessed valuations have no financial problems.

However, both Fremont and Woodland were growing districts in a tax-capped county. Typically, the need to add staff in such districts in order to maintain reasonable class sizes is difficult enough without the loss of hundreds of thousands, or even millions of dollars, annually. Although the loss of funds to charter schools can have serious consequences in higher wealth, tax-capped districts, the impact could be devastating on districts heavily reliant on GSA. This situation would be exacerbated in a district facing declining enrollments.

Another issue for school board members and administrators is that of district autonomy. In essence, a degree of district autonomy is lost when district funds are involuntarily diverted to another institution.

Undoubtedly, both the Fremont and Woodland districts would have made different fiscal and educational choices since 1999, absent the existence of a charter school in their areas. Board members and administrators must be cognizant of the funds available, and must act prudently as they shepherd the use of those funds. This job becomes more difficult as the funds available are diverted to other institutions.

Critics of public schools might say that better use could be made of the funds allocated to school districts and that additional dollars do not necessarily equate to improved achievement on the part of students. However, Illinois public schools have always been accountable for the use of public funds.

The most obvious source of accountability is the ballot box. School board members must be judged on the quality of their actions every four years by the voters. Administrators serve at the pleasure of boards of education. The link between the use of public funds and accountability is less clear in charter schools, which appoint their own governing boards and are exempt from many portions of the Illinois School Code.

There is no doubt that public schools and charter schools have been placed in an adversarial situation due to the nature of the funding aspects of the laws regulating charter schools. In Colorado, many chartering districts and their charter schools enjoy amicable relationships and often cooperate closely on educational issues. This is due, in part, to what is perceived to be a more fair funding mechanism.

Such is not the case in Illinois, which may be a major reason why Illinois has not reached its charter cap outside of Chicago.

References

Illinois Charter School Annual Report, 2008, ISBE, retrieved August 20, 2008, from http://www.isbe.net/charter/pdf/charter_annual_08

"In the matter of the renewal of the charter for Prairie Crossing Charter School," 2003, ISBE, Retrieved August 20, 2008 from http://www.isbe.net/news/2003/2003/sept18-03.htm

"The financial impact of charter schools on Illinois school districts: A primer and three case studies," The Civic Federation, Chicago, Illinois, 2007

Illinois Charter School Law (105 ILCS 5/27A-7(a) (9))

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