Education Law Prof Blog: New Study Finds That Each Charter School Student in North Carolina Costs Local Traditional Public Schools $3500

Helen Ladd is amazing. She is Professor Emeritus and still continues to knock it out of the park with her research.  In the past couple of years, she has opened the nation's eyes to demographic trends in charter schools.  Unlike the common refrain elsewhere that minority students are further racially isolated in charters, she and her colleagues, Charles Clotfelter and John Holbein, showed that in North Carolina charters are increasing enrolling white students while charters increasing enroll students of color.  My thesis has long been that charters are uniquely serving as white flight schools in North Carolina because the state operates county wide public school systems that have traditionally been among the most integrated in the nation (although still far from fully integrated).

This spring Ladd and John Singleton are again pushing the boundaries of our understanding.  They recently published The Fiscal Externalities of Charter Schools: Evidence from North Carolina.  Their abstract explains:

A significant criticism of the charter school movement is that funding for charter schools diverts money away from traditional public schools. As shown in prior work by Bifulco and Reback (2014) for two urban districts in New York, the magnitude of such adverse fiscal externalities depends in part on the nature of state and local funding policies. In this paper, we build on their approach to examine the fiscal effects of charter schools on both urban and non-urban school districts in North Carolina. We base our analysis on detailed balance sheet information for a sample of school districts that experienced substantial charter growth since the statewide cap on charters was raised in 2011. We find a large and negative fiscal impact in excess of $500 per traditional public school pupil in our one urban school district, which translates into an average fiscal cost of more than $3,500 for each student enrolled in charter schools. We estimate comparable to somewhat larger fiscal externalities per charter school pupil for two non-urban districts.

In a new essay with Brookings, they plain speak and contextualize it for us:

In North Carolina, the state is the sole authorizer of charter schools and its authorizing legislation specifies that charter schools are to be funded at the same per-pupil rate as the public schools in the district where the students live. Funding for these purposes includes state funding which accounts for about 65 percent of statewide funding, and local supplemental funding which differs by district based largely on the wealth of the local county.

We collected financial data on school spending from six districts around the state to conduct the analysis. We selected Durham, N.C., (a county district with a traditional public school enrollment of 33,000 students) as our urban district because of: its relatively large share of charter school students (15 percent); its high local funding; and the explicit concerns of district policymakers that charters are adversely affecting the district’s ability to serve its students, many of whom are economically disadvantaged. We selected five illustrative non-urban districts based on their growing shares of charter school enrollments, and our success in obtaining the detailed local expenditure data needed for the analysis.

Estimating fiscal burdens in an art, not a science. Central to the analysis is categorizing local district expenditures into one of two categories. Variable costs–such as spending on teachers–represent those that can be cut back relatively easily with a change in the number of students. Conversely, fixed costs – such as those on administration and facilities–represent long-term funding commitments and are much harder to adjust in the short run.

For the simplest models, we assume that the district can reduce its variable spending on line with the loss of students and that fixed costs cannot be adjusted at all. In fact, however, the district will not be able to adjust its variable spending in this way if the students who shift to charter schools are spread across schools and grades. Hence, we also calculate short-run fiscal burdens that assume some stickiness in variable spending. For some of our estimates, we also vary the treatment of fixed costs by assuming that even in the relatively short run, the introduction of charter schools may allow a fast-growing district to slow its spending on facilities.

Despite these uncertainties and various modeling assumptions, the bottom line is clear. The growth of charter schools imposes clear fiscal pressures on local school districts in the short run. In Durham, for example, the burden is about $500 per traditional public school student. This estimate is somewhat smaller than the comparable per-pupil burdens of $900 and $700 Bifulco and Reback estimated in New York state using similar assumptions. Nonetheless, the potential adverse impact on education quality in Durham is likely to be larger because per-pupil spending in North Carolina is less than half that in New York.

The net fiscal burdens per traditional public school student for our five non-urban districts are lower than what we estimated in Durham, largely because of their lower charter school enrollment shares or reliance on local supplemental funding.

Changing the focus to the excess cost per student enrolled in a charter school, we calculate a burden of about $3,500 per charter school enrollee in Durham, and burdens of comparable or larger magnitudes in two of the non-urban districts.

These impacts, they argue, require a public policy response: state "aid to smooth or mitigate revenue losses for school districts in proportion to the expansion of local charters." 

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Derek Black

Derek W. Black is a Professor of Law at the University of South Carolina School of Law. His areas of expertise include education law and policy, constitutional law, civil rights, evidence, and torts. The focus of his current scholarship is the intersection of constitutional law and public education, particularly as...