Rising cyber charter costs fuel statewide push for reform [map]

Even as funding for Pennsylvania public schools has dwindled, the cost of sending students to independent, online charter schools has risen in more than three-quarters of Pennsylvania’s 500 traditional school districts.

In many of those districts, the mounting financial impact of these “cyber charters” has been dramatic over the last four years. This had led to calls for the state legislature to rethink the rules for such schools.

This year, for example, the 6,300-student Harrisburg School District expects to pay $6 million to cyber charters, the result of a 378 percent increase in student enrollment in cybers since 2010.

This adds, say Harrisburg district officials, to their mounting worries about layoffs, program cuts and other tough decisions.

“We’ve already closed five schools because of the enrollment that has dropped over the last few years,” said Harrisburg Superintendent Sybil Knight-Burney.

“We just want an opportunity to bring some stability to the district.”

Payments rising, performance not

That sentiment, long simmering among Pennsylvania’s school boards and superintendents, is now boiling to the surface.

This year, the state’s 16 cyber charter schools will enroll about 35,000 students from 498 different Pennsylvania school districts. Combined, the schools will receive at least $366 million in taxpayer funds.

This growth is occurring even though no cyber charters met their federally mandated academic performance targets last year, and two are involved in federal corruption investigations.

The money that cybers get comes from traditional school districts, which are required by state law to pay the bulk of the tuition for each student from their jurisdiction who attends any charter, whether online or bricks-and-mortar.

Proponents say cybers are a vital option for multiple types of student and an important piece of the shifting educational landscape across the nation.

State elected officials have taken note of the complaints from leaders of traditional schools. More than a dozen bills related to charter and cyber charter funding reform are currently pending in the state capitol.

“There’s a lot of pressure,” said Republican state Sen. Mike Folmer, chair of the Pennsylvania Senate’s education committee. “We need to do something.”

Getting a deal done could prove difficult.

For the last two years, overall charter reform bills that included changes to how cybers are funded and monitored have failed to pass.

While a number of ideas for fixing specific aspects of cyber funding are now widely considered “no-brainers,” many legislators and advocates are pushing for a more comprehensive reform bill. But such a bill will be much harder to pass.

Just as traditional districts feel under attack from cyber charters, school choice proponents argue that some proposals afoot in Harrisburg could threaten cybers’ very existence.

“Some of the smaller [cyber operators], I don’t think they’d survive one or two calendar years with some of the [funding] reductions that have been proposed,” said Maurice Flurie, CEO of Commonwealth Connections Academy, the state’s third-largest cyber.

The standoff has led “both sides to retreat into their respective corners,” said Jonathan Cetel, executive director of the education policy advocacy group PennCAN.

Hoping to help break the gridlock, Cetel’s group has issued recommendations that it hopes can provide the framework for a deal.

“What we really need are increased accountability and common-sense funding reforms,” Cetel said.

“I’m hopeful that we’re going to find a compromise that can address some of the financial concerns that districts have while still nurturing this innovative movement.”

School districts seek relief

No Pennsylvania school district has been more affected by cyber charters than Philadelphia. As of October, 5,151 city students were enrolled in cybers, a figure that officials from the 144,000-student Philadelphia district expect to grow to 6,000 by year’s end. The district could pay cybers as much as $60 million this year.

Neither the district nor the state was able to provide information on the academic performance or dropout rates of Philadelphia students attending cybers.

A much smaller but more typical example is the 4,700-student Pine-Richland School District in Western Pennsylvania’s Beaver County, which has 48 students enrolled in cyber charters, according to an analysis conducted for NewsWorks by Research for Action, an independent non-profit educational research organization.

Since 2010, the number of Pine-Richland students enrolled in cybers has grown 84 percent, with costs growing nearly as fast.

“Our budget for the district is around $70 million, and the money we pay out to cybers is around $500,000,” said David Foley, Pine-Richland’s interim superintendent.

“Certainly, that has an impact on what we can do.”

Under Pennsylvania’s existing charter school law, both cybers and regular “brick-and-mortar” charter schools receive a set per-pupil payment from the home district of each student they enroll.

The amount of those payments is based on the per-pupil expenditures of the home district, minus deductions for things like debt service, construction, and student transportation. Those payments range from as little as $6,414 (in Altoona, Pa.) to as much as $17,775 (in Lower Merion, Pa.) for regular education students, with substantially more for special education students.

Critics contend that cybers receive far more than they actually need to operate and that much of that money ends up in the hands of for-profit management companies. In 2011-12, Pennsylvania cybers received an average of about $11,000 per student, compared to an average of about $6,500 per student for cybers nationwide.

Critics also point to the failure of all 12 Pennsylvania cybers in operation last spring to make Adequate Yearly Progress as determined by federal law. They cite as well a 2011 study from Center for Research on Educational Outcomes at Stanford University, which indicated that cybers get substantially worse academic results than both traditional schools and brick-and-mortar charters.

Pennsylvania’s cyber charters have also struggled mightily with high rates of “churn,” with students dropping out frequently.

“When students choose cyber options, they can get courses, but it’s not the same education they would get here in the district,” said Pine-Richland’s Foley.

A growing problem

Nevertheless, Foley’s district has seen a steady exodus to cybers, from 26 students in 2009-10, to 36 students in 2010-11, to 39 students last year, and to the current 48.

That attrition is just one piece of the larger budget woes facing Pine-Richland. But after three years of cuts to staff and academic programs, said Foley, that hefty line item for cyber charter expenditures is an increasingly appealing target.

“Five hundred thousands dollars is a big chunk of our budget,” he said. “Absolutely, we want to bring that money back.”

Like many districts across the state, Pine-Richland is trying to reclaim some of those students and dollars by creating its own online programs.

Foley, like many of his counterparts, also hopes to see legislation that limits how much traditional school districts are expected to pay cybers on a per-pupil basis.

A number of pending House bills would allow districts to deduct more costs from what they’re obliged to send to cybers.

In one example, House Bill 979, proposed by Republican state Rep. Mike Fleck of Huntingdon, calls for the elimination of payments to cybers for the pro-rated per-pupil costs that traditional districts incur for providing athletics, meals, library services, and their own cyber or online programs.

“It is my hope that a different [cyber] funding formula will eventually be in place so it can give some kind of relief to districts,” Harrisburg’s Knight-Burney said.

Cyber education not a passing fad

While cutting cybers’ funding may be appealing to cash-strapped school districts, PennCAN’s CETel argues it’s the wrong approach for the long-term future of public education in Pennsylvania.

The bills in the state House are “simply trying to balance the budgets for districts on the back of cyber schools,” he said. “They’re not trying to increase quality.”

That’s a mistake, Cetel argued, because cybers have already shown their ability to spur innovation, pushing brick-and-mortar charters and traditional public schools alike to experiment with new types of online educational offerings.

The rush towards more virtual learning is a national phenomenon that is not going away, Cetel argued. If Pennsylvania wants to avoid getting left behind, lawmakers should encourage the state’s better cybers, not punish them.

“In 10 years, cyber education is not going to look how it looks today. It’s still an infant movement,” Cetel said. “But if we pass a bill that significantly cuts [cybers’] funding, at a certain point it’s going to be difficult for them to operate.”

Flurie, the CEO of Commonwealth Connections Academy, agrees.

This year, the online school, which has a management contract with Connections Education, a subsidiary of the behemoth educational publishing and services company Pearson, enrolls nearly 7,000 students from 468 Pennsylvania school districts.

Commonwealth Connections receives a wide range of per-pupil payments, Flurie says, but still must provide each pupil the same education.

In addition, says Flurie, Commonwealth Connections incurs hundreds of thousands of dollars in transportation and facilities expenses – to send teachers out to deliver state tests, for example, or to lease facilities where students can come for tutoring – for which the school does not receive funding.

“Things are deducted out [of the payments that cybers receive] that seem initially to make sense, but we actually do provide a lot of these services,” he said.

If “punitive” cyber funding reform legislation passes, he maintains, “it would definitely hinder my ability to deliver quality services to children.”

Some lawmakers in Harrisburg, particularly in the Senate, are sympathetic.

“There are those who wish cybers weren’t in existence, because they think it’s their money,” said Folmer, the chair of the Senate Education Committee.

“I just think [some of the proposed legislation] is an attack on the right for a parent to choose.”

Some points of common ground

Still, even some of cybers’ staunchest defenders recognize that the online schools receive funding for some services they don’t actually provide, like giving kids lunch.

“I agree that some of the funding could be taken away from cybers without being detrimental to the student,” said Monica Allison, the president of Pennsylvania Families for Public Cyber Schools.

Most agree the amount that cybers can spend on advertising should be limited. That’s the result of a scathing 2012 report from former Auditor General Jack Wagner, who found that PA Cyber spent $2 million on adveristing during the 2009-10 school year alone.

Such use of taxpayer dollars “doesn’t pass the sniff test,” said Cetel.

And nearly everyone says that it’s time to end the so-called “pension double dip,” whereby charters are effectively reimbursed by both traditional districts and the by the state for pension contributions for their employees.

“We shouldn’t get that reimbursement out of both the left and the right pocket,”
said Flurie of Commonwealth Connections. “That’s a no-brainer.”

But few seem eager to support piecemeal legislation that would address such issues in isolation.

Instead, said Cetel, the focus should be on tackling such “common-sense funding reforms” while simultaneously increasing oversight of cybers, as part of a more comprehensive bill that can resolve some of the sticky issues around brick-and-mortar charters, too.

“Accountability is the best funding reform,” Cetel said. “We can talk about changing the per-pupil payments by 5 or 10 percent, but really, if you have a [cyber] school that’s not serving kids, its funding should be cut 100 percent.”

PennCAN’s policy brief, titled “Freedom to Succeed: Making Cyber Charter Schools Work,” calls for lawmakers to adopt widely-agreed upon funding changes, be more aggressive about closing down failing cybers, and double the renewal terms of successful cybers from 5 to 10 years.

“To me, it’s an easy compromise,” Cetel said. “We need to encourage innovation while having the right regulatory infrastructure to shut down [cybers] that aren’t serving kids.”

A raft of reforms

But for the most part, lawmakers in Harrisburg aren’t there yet.

In the Pennsylvania House, Democratic representative James Roebuck has introduced a comprehensive charter and cyber reform bill that’s friendly to the views of traditional school districts. It seeks to rein in payments to charters while imposing strict new accountability measures and limiting charter growth.

“There is nothing suggesting that what you have [with charters and cybers] is a great new educational model that’s innovative and that kids learn better,” said Roebuck.

On the other side of the table, many charter and cyber proponents have pinned their hopes on the state Senate. Cetel predicts senators will put forward bills that go less aggressively after cybers’ funding while reviving controversial proposals – such as the creation of a statewide charter school authorizer – that are widely perceived as more charter-friendly.

“I’m a big school choice person,” said Folmer, the chair of the Senate education committee. “”We’ve got to stop defending the 19th century model of education.”

With all signs pointing to the continued growth of online schooling, said Cetel, Pennsylvania lawmakers should be focused on smartly planning for the future, not re-fighting old battles that have led to stalemate.

“How do we support innovation while balancing the need for accountability and quality?” asked Cetel.

“That’s the debate I want Harrisburg to be having.”

Listen to the audio version of this story below:

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This story was reported through a partnership in education coverage between WHYY/NewsWorks and the Public School Notebook. Support for this project came from witf-FM in Harrisburg. Special thanks to Research for Action and Maneto Mapping & Analysis.