The Funding Gap: How Michigan Charter School Students Get Shortchanged

James N. Goenner & Don Cooper

From time to time, we feature analysis of education reform issues in other states--in this case, Michigan. Below, James Goenner and Don Cooper of the Center for Charter Schools at Central Michigan University, which authorizes (i.e., sponsors) 58 charters in the Great Lakes State, reveal that the charter school funding gap isn't just a problem for Ohio's charters.
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Central Michigan University's (CMU's) involvement with public charter schools began in 1994 when we became the first university in America to charter a school, expanding on a tradition of leadership that began in the late 1800s when CMU educated its first public school teachers.

CMU got involved because we believed charter schools would serve as a catalyst to advance public education and benefit all Michigan school children. Today, we are the largest university authorizer of charters in the country, chartering 58 schools that serve nearly 30,000 students.

After reading the groundbreaking report Charter School Funding: Inequity's Next Frontier, published by The Thomas B. Fordham Institute, we decided to examine the size of the funding gap between students who attend the public schools we charter and those attending conventional district schools. As the report rightly noted, the issue of equitable school funding has been debated and litigated for decades. Overall, progress has been made, yet there is no doubt that more can be done.

For years, funding equity advocates have rightly argued that all children have the right to a quality education. Appealing to Americans' fundamental belief in fairness and citing constitutional and civil rights provisions, advocates for equity were able to build a strong coalition of support. Sadly and ironically, as we transition from the era of school assignment to the new era of school choice, some who fought so hard and so long to overcome funding injustices find themselves working against equitable student funding for children whose parents have chosen to enroll them in charter schools.

The Gap in Operating Funds

To illustrate the funding gap that results from this inequity, we compared the standard "foundation allowance"--the operational funding that follows each Michigan student--for students who attend conventional district schools to those who choose to attend the public schools chartered by CMU.

The amount of public funding that follows a student in the form of the foundation allowance depends on the school district where the student lives. For the 2006-2007 school year, the foundation allowance ranges from a low of $7,085 to a high of $12,340 per student. However, for students who choose to attend a charter school, Michigan law caps their foundation allowance at $300 above the minimum foundation allowance of $7,085, regardless of how much the conventional school district where the charter school is located receives per student. 

This inequality results in students at nearly 70 percent of the schools chartered by CMU receiving less foundation funding for their education simply because their parents chose to enroll them in a charter school instead of having them assigned to the district school. In real dollars, this gap ranges from $25 to nearly $4,000 less in foundation allowance revenue per student for the public schools we charter. For example, if the Southfield Public Schools, a conventional school district located near Detroit, received the same per-pupil foundation allowance as the public schools we charter that are located in Southfield, Southfield Public Schools would receive about $37.6 million less foundation funding per year.

"Categoricals" and Other Revenue Sources

While the foundation allowance revenue is the primary funding source for Michigan's public schools, it is far from the only source. Public schools also receive additional state funding for selected programs like pre-school and adult education; for school breakfasts and lunches; for extra costs for educating at-risk and court-placed pupils; and for numerous other smaller programs targeted towards specific schools or student populations. Some of these programs include:

  • "At-Risk" Funds. Michigan provides supplemental funding to schools to provide extra support services for "at-risk" students. However, this supplemental funding is equal to a percent of the foundation allowance for eligible students, rather than a flat per-pupil dollar amount. Because the foundation allowance for charter school students is capped, this results in "at-risk" students attending charters again getting shortchanged simply because their parents chose to enroll them in a charter school instead of having them assigned to the district school.

  • Grants, Earmarks, and Special Programs. Like many state legislatures tend to do, the Michigan Legislature has created numerous special programs and grants for various conventional districts. Whether well-intentioned or politically motivated, these grants increase the inequities between conventional and charter schools by millions of dollars each year.   

In total, these and other state programs substantially widen the funding gap between conventional and charter schools. For example, in a 2006 report to the Michigan Legislature, the Michigan Department of Education (MDE) calculated the total general fund revenue gap between all Michigan charters and the state-designated "host" school districts to be $2,612 per student in fiscal year 2005.

Also, unlike Michigan's conventional school districts, charter schools cannot levy local property taxes to pay for facilities or capital costs. Instead, charters are required to pay for facilities and capital from their operating revenue. When locally generated facilities funding is factored in, the gap grows even further: 

  • Debt Retirement. Through their local taxing ability, conventional school districts throughout the state collected almost $1.5 billion last year to pay off debt for facilities and capital.

  • "Sinking Fund" Revenues. Also through their local taxing ability, conventional districts collected a total of $124 million in "sinking fund" revenue--funds that are allocated for purchasing facilities in the future. 

Focused on Student Achievement

Even in light of these funding inequities--inequities that some have historically used to justify and excuse poor performance--the schools we charter are focusing their resources on helping all students learn. 

Results from the annual Michigan Educational Assessment Program (MEAP) tests continue to demonstrate progress. Fall 2006 MEAP tests showed that, as a group, students in schools chartered by CMU outperformed students in the host district comparison group established by MDE on all 27 tests administered to 3rd through 8th graders in all core academic subjects: math, English/language arts, science, and social studies.

In the transition from the era of school assignment to the era of school choice, there will be many obstacles to overcome. As we prepare to overcome these obstacles, it would be wise to remember the words of Hubert H. Humphrey, "You can always debate what you should have done. The question is what are you going to do?"

by James N. Goenner & Don Cooper

James N. Goenner is the Executive Director of the Center for Charter Schools at Central Michigan University in Mt. Pleasant, MI. Don Cooper is the Center's Special Advisor for State and Federal Policy. For further information about the authors or the Center, visit http://www.thecenterforcharters.org/.

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