Tag Archives: school finance

9 Considerations for Charter School Mergers in an Era of Limited Budgets

Since March, school funding experts have sought to understand how the economic turmoil coming out of the COVID-19 pandemic would affect school revenue. Most analysts agree that the impact will be significant and will be felt most by those who are the furthest from opportunity. Unfortunately, charter schools — which nationally enroll a student population that is 52 percent low-income, 25 percent Black, and 34 percent Hispanic — are particularly vulnerable to variations in state funding. 

Charter schools struggling with financial sustainability may consider whether the school’s mission might be better served by merging with another charter school. However, while charter school mergers can work, they are far from a simple solution and must be approached carefully.

As our colleagues Lina Bankert and Lauren Schwartze have previously written, a “merger” can take many shapes but, fundamentally, it involves joining together two or more organizations as one entity — through a formal legal agreement — in pursuit of a common goal. In the current financial climate, financial sustainability may be what prompts schools to explore a merger, but any merger conversation should start by defining all of the reasons why it could be a strategic move for each partner in the merger.

These nine considerations will help school leaders determine whether a merger might make sense for their school:

While a merger can support better financial efficiency in the long-term, financial efficiency is neither immediate nor guaranteed. If school leaders are pursuing a merger first and foremost because they believe it promises immediate financial benefits, they should stop and reconsider. A successful merger between two or more charter schools requires a short-term infusion of funding to support the merger process. To conduct due diligence, support internal decision making, plan implementation, and ensure a smooth transition period, school leaders will need financial resources for necessary staff time and legal expertise. Any long-term financial efficiencies will only occur after an initial up-front investment that can sometimes total hundreds of thousands of dollars.  

While a merger can increase financial strength by achieving a larger or more stable revenue base (via combined student enrollment) and by enabling some economies of scale, in practice the additional revenue is often used to support a high-quality school model, via investments to support rigorous and consistent instruction for the merged institution. As a result, a merger should not be thought of as a strategy for “saving money” per se, but instead as a way to combine resources to provide a high-quality education to more students, with the stronger financial footing that comes with that.   

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Student-Based Budgeting in Service of Equity: A Q&A With Jess Gartner of Allovue

This interview was conducted just before the coronavirus pandemic upended schooling across the country. We decided not to publish this while educators, students, and families navigated the first phase of this crisis, but now, as district and school leaders develop plans for the 2020-21 school year, we believe this conversation’s focus on budgets and equity can inform their decision-making.

This post is also part of a series of interviews conducted for our Eight Cities project. Read all related posts here.

School funding. Are we spending the right amount? Are we spending it fairly? Are we spending it wisely? These questions get the most attention when state legislatures debate policies that involve millions or even billions of dollars, or when those policies are challenged in court. Those conversations are critical — state funding policies are foundational to how schools are resourced — but they aren’t the whole story.

Less often discussed is how funding is allocated from districts to schools, which can have a major impact on equity. Most districts build school budgets based on inputs required to run each school, largely reflecting compensation costs for the teachers, administrators, and support staff employed in a school, plus budget for materials and supplies. This method may sound logical on its face, but it can limit strategic spending decisions and result in inequitable allocation of resources.

An alternative approach that some districts are beginning to explore is student-based budgeting, which allocates funds based on the students served in each school, weighted for factors associated with their individual education needs (such as income status, disability status, or status as a dual- or English-language learner).

Student-based budgeting can be a driver of equity and support district innovations like those highlighted in our Eight Cities project. When equipped with a budget that reflects the needs of their students, school leaders can then leverage increased school-level autonomy over key decisions, including staffing and budgeting, and customize school programs and operations to the needs of their students.

Allovue, a Baltimore-based education financial technology (EdFinTech) company, works with school districts to build and support technology-based solutions to plan, manage, and evaluate spending. We talked with CEO Jess Gartner to get more insight into student-based budgeting, particularly with an equity lens, and the opportunities and challenges it presents to districts.

"I am a huge proponent of principal autonomy – it's actually what got me into this work. I think that students and communities are best served when you put decisions and dollars in the hands of leaders that are closest to them"

This conversation has been edited for length and clarity.

At the heart of your company’s mission statement is a focus on equitable budgeting. What does that mean in practice?

Equity is not a “one size fits all” thing. There’s not a single “answer” for an equitable funding formula. You have to take into account the needs and context of the local community and align that to the needs of students and the resources they need to be successful in that district. A lot of the work we do starts with a “steady-state analysis” and helping districts understand where they are today. We are then able to dig in at a deeper level and ask: “What are some things jumping out at you as potentially problematic or areas that you want to improve?” We often see either an inverse correlation between need and dollars that are allocated or dollars that are spent, or we see a completely equal allocation of resources. In an ideal scenario, the resources are correlated positively with the needs of students.

Our recommended approach is to use the first six to twelve months with a targeted group of internal stakeholders to see where they are today. We can’t inform your strategy one way or another until we all have some time to look at where you are today.

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Misinformation About California’s Special Education Systems and Enrollment Trends Won’t Help the Fiscal Crisis

Many California school districts are in financial trouble. Teacher pensions consume an increasing share of K-12 spending, and inflexible collective bargaining agreements and declining enrollments stretch district budgets.

In this strained financial environment, some of the complexity of California’s school finance system is lost, leading to simplified analyses and incomplete solutions. Addressing the financial shortfall requires a comprehensive understanding of the many different ways funding works in the state.

cover of Bellwether report cover of Bellwether report

 

 

 

 

 

 

To that end, we released new issue briefs yesterday that provide needed context and clarity on important issues in the state: special education financing and school enrollment trends and facilities. These issues have become part of the financial policy debate, but there are misunderstandings that unnecessarily fan the flames of tension between traditional and charter schools. For example, misleading analyses of enrollment trends and their impact on district finances make it more difficult to accurately assess facilities needs for districts and charter schools. And, since charter schools often enroll fewer students with disabilities, many can mistakenly believe that they are not contributing their share to special education.

But this isn’t quite right. Our hope is that a sober examination of these systems will point to reforms that can help schools of all types better serve students.

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New Report: Benefit Spending Consumes Growing Share of Education Budgets

The recent teacher strikes in Arizona, Colorado, and West Virginia highlight a common problem: education spending is stagnant or in some cases decreasing. If teachers working multiple jobs to make ends meet isn’t bad enough, here’s worse news: skyrocketing benefit costs, such as healthcare and pensions, are consuming an increasing share of K-12 education budgets.

In a new report, “Benefits Take Larger Bite out of District K-12 Budgets,” I analyzed district education and benefit spending from 2005 to 2014. The results are troubling. Over that ten-year span, benefit spending increased more than 22 percent nationally. K-12 spending, on the other hand, grew less than 2 percent. As a result, more than $11 billion fewer dollars made it to classrooms in 2014 compared with 2005, after adjusting for inflation.

The problem of rising benefit costs varies significantly by state. As shown in the graph below, in the vast majority of states, benefit spending grew far faster than education budgets overall. In North Carolina, for example, benefits grew 48 percent while the state’s education spending only increased 2 percent. The problem persists even in states like Michigan that cut both K-12 and benefit spending, because they weren’t cut at the same rate. The Wolverine State cut education spending by 19 percent, but benefits were cut by only 2 percent. As a result, benefits eat up an even greater share of Michigan’s education budget than they did previously.

via “Benefits Take Larger Bite out of District K-12 Budgets”

Barring a dramatic change, the problem of ballooning benefit spending will only get worse. Due to many states’ histories of underfunding their pension systems while simultaneously increasing the generosity of the plan, costs will continue to rise. Legislators will need to find politically viable solutions that both meet existing obligations and mitigate rising costs going forward.

Read my full report here.