2004-2005 Education Policy Fellowship Program
WHAT CHANGES SHOULD BE MADE IN STATE
LAW RELEVANT TO CHARTER SCHOOLS AND/OR
CYBER CHARTER SCHOOLS?
Rae L. Talley
Leigh N. Whitaker
May 6, 2005
With the passage of Act 22 in 1997, Pennsylvania became the 27th state to authorize the
creation of charter schools. Charter schools are publicly funded schools that operate under
contract with the local school district and provide educational services to students of certain
grades for a period of five (5) years. Charter schools were established to provide opportunities
for teachers, parents, pupils and community members to establish and maintain schools that
operate independently from the existing school district structure as a method to accomplish all of
1. Improve pupil learning;
2. Increase learning opportunities for all pupils;
3. Encourage the use of different and innovative teaching methods;
4. Create new professional opportunities for teachers, including the opportunity to
be responsible for the learning program at the school site;
5. Provide parents and pupils with expanded choices in the types of educational
opportunities that are available within the public school system;
6. Hold the schools established under this act accountable for meeting measurable
academic standards and provide the school with a method to establish
Charter schools were designed to put communities in charge of the educational needs of
its children. Charters allow parents, teachers and community members the ability to develop
unique and creative educational programs for children that are free from the bureaucratic
constraints that occur at the local school district. Charter schools are designed to increase
student achievement and encourage competition with the local school district. Finally, charter
schools are more accountable than traditional public schools. Traditional public schools rarely
close a failing school or terminate poor performing teachers. Charters, on the other hand, must
clearly state their educational goals, develop a plan for meeting those goals, and risk non-renewal
of their charter and permanent closure if the goals are not met.
While charter schools provide increased educational opportunities for students and choice
for parents, Act 22 does create significant issues for both the local school districts and the
charters themselves. Specifically, there are four areas of the charter law that we recommend
changing: (1) governance, (2) cyber charter schools, (3) charter school funding, and (4) special
education. In addition, we will make recommendations for ways to improve the current law
without damaging its spirit and intent.
Act 22 gives local school boards the authority to receive and grant applications for
charter schools. Charter schools may be established by an individual, one or more teachers who
will teach at the proposed charter school; parents or guardians of students who will attend the
charter school; any non-sectarian college, university or museum located in the Commonwealth;
politicians; any corporation, association, or partnership; educational management company for
profit; or any combination thereof.
Act 22 specifies the information that must be submitted with the application and also
provides guidance for local school boards on how to evaluate the applications within a specific
time frame. Applications must clearly state the educational goals and objectives for the charter
school and an articulated plan for meeting those goals. The purpose of these application
requirements is to increase the likelihood that schools that receive charters are quality
educational entities designed to serve the best interests of the children and communities they
intend to serve. Local school boards review these applications and decide whether a charter will
be granted. The local school board is also responsible for monitoring the performance of the
charter school and has the power to deny the renewal application of a failing charter school after
the initial time period has elapsed. (It is worth noting that for two years after the passage of the
charter law, local school board decisions not to grant a charter were not subject to any appeal. In
July 1999, the State Charter Schools Appeal Board was created to hear appeals from groups that
have been denied a charter, review the decisions of local school boards, and overturn those
decisions when appropriate.)
Currently, there are 103 charter schools operating in the Commonwealth of Pennsylvania.
In the eight years since the charter law was passed, significant issues have surfaced regarding the
governance of charter schools. First, the authority of the local school district to grant, monitor
and renew charter schools has created an adversarial relationship between local districts and
charter schools. If charter schools were created based on the premise that the local school district
was failing, then why give the failing school district the power to approve and renew
independent public schools? Local school boards often view the creation of new public schools
as a criticism of the local district, thereby creating an adversarial relationship with the charter
school at the onset. Second, local politics takes precedence over who gets approved to operate a
charter school. This scenario creates a financial drain on the local district, fails to provide
quality choices for parents, and increases the liability of the local school district when poor
charters can’t meet minimum operational requirements. Third, the authorization process for
charters is not judged equally. Because the creation of charter schools will likely result in a loss
of funds for the local school district (discussed in more detail in the Charter School Funding
section), local school districts review charter applications under a microscope, sometimes setting
unrealistic standards and stringent parameters as conditions for approval. The result is a very
contentious relationship between charter schools and the local school districts and a disincentive
to work together to improve student achievement.
Cyber Charter Schools
Act 22 did not consider the creation of cyber charter schools, which deliver long distance
instruction solely via the Internet. Several of the previously stated governance and funding
issues are exacerbated in the case of cyber charter schools. Local school districts have limited
ability to participate in the approval and renewal process of cyber charters that are approved by
outside school districts. This increases the likelihood of a contentious relationship between the
local school district and the cyber charter school. At best, there is minimal interaction between
the cyber school and the home district and no perception of a partnership in the interest of the
education of cyber school students.
These local school districts still bear the responsibility of paying tuition to cyber charter
schools for resident students. The funding of cyber charter schools has caused a significant drain
on public school resources in the same ways that regular charters do. Cyber charter schools have
aggressively marketed their services to the home schooling population. Cyber charter schools
offer a free computer and payment for online service provider fees in exchange for enrollment
and the tuition fees that follow. This is attractive to parents who home school, because they still
retain the control of a home-based education for their child, but receive resources they typically
funded out-of-pocket. Meanwhile, as cited later in the Funding section, there are increased costs
for the local school district. Similar to a nonpublic student enrolling in a charter school, there are
no offsetting expenditures for the home school student who chooses to enroll in a cyber charter
The cyber charter school receives a payment based on the tuition expense of the student's
district of residence. Tuition payments range from $5,000 to $11,700 (2004-05 tuition costs) for
regular education students across the state. Payments for special education students are higher.
This funding mechanism makes sense for a "bricks and mortar" charter school located within the
geographic boundaries of the home school district since it can be argued that the cost to run the
school would be comparable to cost to the local district. The cyber charter funding mechanism
has no relationship to the expenses incurred by a cyber charter school. Profits earned by cyber
charter schools constitute a potentially wasteful use of taxpayer dollars. When long distance
learning options are offered by local school districts, any savings over traditional educational
methods can be funneled back into the budget to benefit students.
Charter School Funding
Charter schools receive their funding from the local school district in which their students
reside. The amount of the per-pupil payment made to charters by local school districts is
dictated by a formula prescribed by the charter law. The charter law also requires local school
districts to provide a supplemental per-pupil allocation, in addition to the regular per-pupil
payment, for every student with a disability who is enrolled in a charter school. The regular
education payment is calculated by taking the local school district’s expenditures (minus the per-
pupil expenditure for special education programs, adult education programs, community college
programs, student transportation services, and facilities acquisition, construction and
improvement services, debt service, and federal programs from the local school district) divided
by the local school district’s average daily membership (ADM). This funding mechanism was
created to ensure that the dollars used by the local school district to educate the student follows
that student to the charter school.
Local school districts do not achieve any savings with each charter school that opens.
The tuition payments to charters from host districts as structured in the charter law result in a net
financial loss to local school districts for several reasons. First, school districts pay charter
schools a per-pupil allotment for every resident student who enrolls in a charter school. Charter
school students transfer from classrooms in traditional public schools. Therefore, if one or two
students leave one classroom, the local school district still has to pay the teacher for the
remaining children in that class. In addition, the school has to pay the salary of the nurse and the
guidance counselor as well as cover fluctuating overhead costs (utilities, maintenance, etc.) and
administrative expenses. Because only a few students from each public school transfer to a
charter school, the local school district does not have the ability to close or consolidate any
traditional schools, thereby resulting in an additional expense for the local district.
Second, local school districts are required to make payments to charter schools for every
nonpublic student who is a resident and is enrolled in a charter school. The local district does
not reap any savings when a nonpublic student enrolls in a charter school because there were
minimal district expenditures for that student prior to the charter enrollment. While the local
district does receive temporary financial assistance from the state for nonpublic students
attending charter schools, the assistance is not enough to offset the entire per-pupil payment that
is sent to the charter school.
Local school districts receive charter school reimbursement up to 30 percent of the prior
year’s cost on a pro rata share from the state. The reimbursement is not nearly enough to relieve
the financial burdens charter schools place on the local school district. For example, the School
District of Philadelphia accounts for half of all charter schools in Pennsylvania. In the 2003-
2004 school year, Philadelphia’s charter school expenditures were $152,883,103. Philadelphia
received $28,446,656 in reimbursement from the state, resulting in an additional financial drain
on an already cash-strapped school district.
Additional factors that increase the cost to local school districts include the charter law
requirement that the local school district transport charter school students up to 10 miles outside
of the district’s geographic boundary. With the reimbursement from the state hovering in the 30
percent range, the cost of transporting charter school students is burdensome on local school
districts. In addition, local school district’s special education funds are capped at the state level,
while charters are not, resulting in an additional drain on local district resources. Finally, charter
schools often attract higher performing students from higher income families, thereby leaving the
local school districts with the most needy and costly students to educate.
Special education is another area where the charter law has fallen short. Many of the
issues related to educating special education students who are enrolled in charter schools are
related to funding, or lack thereof. Charter schools are insufficiently funded, which results in a
negative impact on the attending students who have special needs. The current system of funding
also causes a financial burden on local school districts that must provide per student funding to
the charter school that its students attend. As a result, the education of students with special
needs in the local school districts can be adversely affected.
In order to fully understand the flaws of the current funding system, attention must first
be focused on the facts surrounding charter school funding. According to The Evaluation of the
Pennsylvania Charter School Reform-Interim Report, the number of students who have
Individual Education Plans (IEPs) in charter schools ranges from 0 to 21 percent of the total
charter school population. In this evaluation, it was reported that, of the 71 charter schools that
reported IEP data, 53 enrolled a lower proportion of students with IEPs than the state average; 10
charter schools had fewer than three percent of their student population with IEPs, and 18 of the
charter schools had a higher proportion than the state average.
The students with IEPs who attend charter schools primarily have minor disabilities and
are less expensive to educate. The students who have more significant disabilities are more
expensive to educate, and continue to be educated at the host school district. During the 2001-
2002 school year, 8.5 percent of charter school students had IEPs compared to the state average
of 13 percent. The proportion of IEP students with severe or moderate disabilities was three
times higher in host districts.
Given the current system of funding in Pennsylvania, a burden is created on local school
districts. Charter schools attract the students with IEPs who are less expensive to educate.
Charter schools receive a flat rate for students with IEPs in addition to the flat rate that the
charter receives for every student. The flat rate for every student plus the additional flat rate for
IEP students is given to the charter regardless of how complex the students’ disabilities are. This
can potentially leave the IEP students who are more expensive to educate at the host school
districts. Local school districts only receive funding for the students they had enrolled the
previous year, based on the same rate that charter schools receive for each of their students with
IEPs. When charter schools disproportionately attract students without disabilities or with low-
cost disabilities, special education enrollment rates increase among students left behind in nearby
traditional public schools, which raises average costs and potentially limits funds available for
Of the 84 charter schools with AYP data for the 2003-2004 school year, 37 did not make
AYP. Of these schools there was only one that did not make AYP because of the academic
proficiency of its special education students. However, a school needs to have at least 40
students in a category for disaggregated data to count toward the school’s overall AYP data.
After finding charter school AYP data on www. paayp.com, we were only able to find a handful
of schools that had enough special education students for their data to count toward AYP. The
fact that only one charter school did not make AYP in the 2003-2004 school year because of the
students requiring special education’s academic proficiency is not indicative of overall charter
school success. It only means that the majority of charter schools do not have enough students in
the IEP category to count toward AYP. In addition, host school districts likely do not receive
appropriate funding to oversee all of their programs and initiatives. With this lack of appropriate
funding comes insufficient staff. Insufficient staff may lead to limited oversight capabilities of
the host district’s charter school(s).
Charter schools are expensive to operate, and as a result may be considered fiscally
responsible when they discourage the attendance of students who are more costly to educate. A
charter school’s incentive to enroll a student with a disability depends on the difference between
the additional revenues it receives versus the additional costs it incurs for serving that student
(Arsen & Ray, 2004). Arsen & Ray (2004), state that charter schools that have converted from a
traditional public school face lower incremental costs to serve special education students than
newly established charter schools, because they do not have to develop capacity from scratch.
However, most of the charter schools in Pennsylvania are not conversion charter schools and so
have tremendous start-up costs. Compounding the financial burden on charter schools are
maintenance costs. Some examples of maintenance costs follow.
A significant factor in improving student education is the quality of the teachers who are
delivering instruction. Charter schools do not have sufficient funds to provide competitive
salaries and benefits to teachers in order to attract and keep quality and experienced teachers.
This turnover serves to undermine any effort that charter schools have made in the area of
professional development. High turnover has a negative impact on the quality of education that
the charter school is providing. This impact is greatest in special education because the ability to
effectively educate and/or determine appropriate adaptations for students with special needs
requires appropriate teacher training and experience. Additionally, there are many special
education-specific costs that compound to hinder the educational benefit that charter schools can
According to §711.41, when a child transfers to a charter school from another educational
agency, the charter school is responsible, upon enrollment, for ensuring that the child receives
special education and related services in conformity with the IEP or by developing a new IEP for
the child in accordance with the requirements of the IDEA. Due to insufficient funding, however,
the charter school may not be able to adopt the existing IEP. The insufficient funding can hinder
the charter school’s ability to purchase educational materials, recruit and maintain highly
qualified and effective teachers, and provide appropriate professional development.
As stated in §711.43, when the IEP team at a charter school places a child in another
public agency, private school or private agency, and the parents choose to keep their child
enrolled in the charter school, the charter school is responsible for paying for that placement.
Charter schools can easily get into this situation as many parents choose to enroll their children
in charter schools with hopes that the charter school will be able to do something for their
children that the host districts could not. These parents may offer incomplete information to
charter school enrollment officers during the application process. Based upon the information
provided by the student’s parents, charter schools may enroll the children. Upon educating the
child, the charter school may discover that they are not sufficiently equipped to handle the
child’s unique educational needs.
In §711.21, it states that each charter school shall establish written policies and
procedures to ensure that all children with disabilities that are enrolled in the charter school, and
who are in need of special education and related services, are identified, located and evaluated.
This includes (1) public awareness activities sufficient to inform parents of children applying to
or enrolled in the charter school of available special education services and programs and how to
request those services and programs. This also includes (2) systematic screening activities that
lead to the identification, location, and evaluation of children with disabilities enrolled in the
charter school. These activities require a great deal of funding in the form of record-keeping
capabilities, staff development, and organization. In addition to this record-keeping expense is
the provision of §711.22, which states that the parent or teacher of a student with a disability
may request a reevaluation at any time.
The record-keeping requirements of charter schools combined with insufficient funding
and ineffective staff development can lead to confusion and inadequate educational experiences
for students. In a national study reported by Arsen & Ray (2004), researchers found higher rates
of special education students reported when they asked charter school officials to tell the
researchers how many special education students they enrolled than when the researchers
actually used the number of IEPs in each charter school to determine the percentage. The charter
school officials did not know how many students with IEPs they enrolled. This implies a
tremendous disconnect of record-keeping, which leads to an implication of inadequate service
This inadequate record-keeping due to insufficient funding leads to further inadequate
service delivery. According to Arsen & Ray (2004), charter school officials indicate that some
students who formerly had IEPs in their traditional public school are not identified when they
move to a charter school by mutual consent of the parents and the charter school (U.S.
Department of Education, 2000). Non-identification of special education service needs can lead
to any number of educational, legal, and financial difficulties in the future.
Newly-created charter schools may be afraid of special education enrollment due to the
increased paperwork requirements, commitment to educational methodology, and cost. Charter
schools cannot deny enrollment or otherwise discriminate in their admission policies on the basis
of a child’s disability or the child’s need for special education or supplementary aids or services
(§711.7). In addition, like traditional public schools, charter schools must offer a continuum of
The challenges of the current system of funding combined with all of the associated costs
of educating students with IEPs may lead charter schools to accept students with IEPs
commensurate with the costs that they will incur and the funding that they will receive. Chapter
711 is written in such a way that charter schools cannot legally turn students with IEPs away, but
there are ways that charter schools may discourage these students from enrolling. The fact that
charter schools have been primarily accepting or attracting only those students with mild and
inexpensive disabilities creates a financial burden for host school districts. However, students
with special needs deserve to have every opportunity that non-IEP students receive. Charter
schools exist with the expectation that they will offer new and innovative foci and practices.
Charter schools cannot effectively educate students with special needs unless they are receiving
1. The Pennsylvania Department of Education should be responsible for reviewing and
approving charter school applications, monitoring charter school performance, and renewing
successful charters, thereby taking the responsibility away from local school districts and putting
an end to the contentious, even hostile, relationship between local school districts and charter
2. Since charter schools operate independently from local school districts, the state, not
local school districts, should be responsible for the cost of operating charter schools. To that
end, charter schools should receive their funding directly from the state, thereby eliminating the
financial strain on local school districts’ operating budgets.
3. Local school districts should develop long distance learning initiatives, at either the
Intermediate Unit or LEA level, which would encourage partnerships with entities delivering
cyber instruction. This will result in significant cost savings. More importantly, it will lead to
improvements in education through more oversight of cyber instruction.
4. The Commonwealth should extend the charter period from five (5) years to ten (10) years
to allow a more reasonable and realistic time period in which to increase and enhance student
achievement. The additional time period will also allow charter schools greater flexibility to
borrow money for building construction, renovation, or other capital improvements.
5. Charters are public and should be included in all state and federal grants. Currently,
charter schools are not eligible to receive Accountability Block Grants from the Commonwealth
6. If a charter school experiences significant management and financial trouble during the
charter period, the Pennsylvania Department of Education should immediately issue the charter
school a corrective action plan with time limits. If the charter school does not show any
improvement, the Department should revoke the charter for a poorly performing school.
7. Pennsylvania should adopt a system similar to the ones used in Florida or North Carolina.
Florida applies a pupil-weighting system of reimbursement. The funding weights increase with
the disabling condition’s severity. The weights range from an additional 1.35 for mild disabilities
to nearly 7 for the most complicated special needs. Across the range of disability types, state
reimbursements are generally sufficient or more than sufficient to cover the cost of required
services (Nelson et. al., 2002). This system of funding provides sufficient funding for charter
schools to attract and effectively educate all students with IEPs. The funding should be based on
the charter school’s enrollment of students with IEPs. This system will help ensure that charter
schools effectively identify, track, and provide services to all of the students that it enrolls.
North Carolina provides funding by way of a flat grant of $2,346 per special education student
up to a cap of 12.5% of enrollment. For students with mild disabilities, the additional state
revenue sometimes exceeds the cost of services (sometimes substantially), which creates a
financial incentive to attract and identify students with mild disabilities. This excess can then be
used to improve the overall special education services for the charter school.
Pueblo School District No. 60
The number of charter schools in the United States will continue to increase. At the 2004
Charter School Conference held in Miami, Florida, only 45 out of 50 states were not charter
states. It has been predicted that by the end of 2006, all 50 states will have passed a law
authorizing the formation of charter schools. As the old cliché goes, “if you can’t beat them, join
them.” Pueblo School District No. 60 located in of Pueblo, Colorado did just that. As of March
2005, Pueblo School District had 30 charter schools. The district was considered a failing school
district and parents were in an uproar. On the other hand, the charter schools in Pueblo were
excelling academically and had significant community support. The school district began to pay
closer attention to its charter schools when over 50% of the charter schools made adequate yearly
progress (AYP) under No Child Left Behind.
The Pueblo School District decided to invite all the charter schools’ administrative teams
to a strategic planning meeting to determine how they could work together. The charter schools
were not enemies of the local school district, they were simply trying to offer school choice to its
parents and community.
The charter school team developed a list of requirements that were necessary for
improving the relationship between the local school district and the charter schools:
(1) The Pueblo School District will make a public announcement to the Pueblo
community announcing the formation of a partnership with the charter school
community and designed to change the negative perception of charter schools that
the local school district helped to create.
(2) One member of the charter school administration will serve on the local district
Superintendent’s cabinet and one member of the local district’s Board of
Directors will serve on the State Charter School Executive Board.
(3) The charter schools’ administrative teams will have a very strong, active voice in
the local school district’s strategic plan. The plan was written and approved not
by the local district’s Board of Directors, but by each charter school’s Board of
As of March 2004, Pueblo School District No. 60 and its charter schools have an
academic and business working relationship. Both the home district and charter schools are
Cyber Charter School Competition
Instructional delivery via the Internet is not going away. LEAs should be pursuing
partnerships that incorporate the best practices available to offer as options for student learning.
The US Department of Education released the results of a study on distance learning in
public K-12 schools. The following are some of the key findings of the study:
In 2002-03, there were an estimated 328,000 enrollments in distance education
courses among students regularly enrolled in public school districts.
There were an estimated 45,300 enrollments in Advanced Placements or college-level
courses offered through distance education in 2002-03.
Those districts with students already enrolled in distance education courses were also
very likely to have plans for expanding their distance education courses in the future.
72% of districts with students enrolled in distance education courses planned to
expand their distance education courses in the future.
Clearly internet instruction has been established as an effective educational tool. Public
school districts cannot arbitrarily dismiss the premise of cyber charter schools in favor of
traditional methods of instruction. Public schools should instead establish themselves as the
leaders in recommending best practices for cyber instruction. Central Dauphin School District, a
suburban Harrisburg school district, plans to go head to head with the cyber charter schools to
compete for student enrollments in its own program by offering a diploma. Central Dauphin is
partnering with Blended Schools.net to offer an alternative to students in cyber charter schools.
Central Dauphin chose Blended Schools. Net because its curriculum is designed to meet the
Pennsylvania state standards. Also, an integral component of Central Dauphin's program will
include supervision by Central Dauphin teachers.
Significant financial savings for both the LEA and the state could be realized if public
schools directly provide cyber instruction. As discussed earlier, there is no valid relationship
between the tuition paid by a sponsoring school district for cyber education and the costs
incurred to deliver the education. The costs incurred by LEAs include profits earned by for-
profit entities involved in the management of cyber schools. The LEA could realize cost savings
by lowering overall education costs. The state would share in the benefits as well due to the
30% funding formula.
This will allow us to meet our third policy recommendation regarding the development of
Long Distance Learning initiatives at either the Intermediate Unit or LEA level, that encourage
partnerships with entities delivering cyber instruction, rather than adversarial relationships. This
will result in significant cost savings. More importantly, it will lead to improvements in
education through more study and oversight of cyber instruction.