No Excuses! Really? Another Look at our NEPC Charter Spending Figures

May 8, 2012

Not surprisingly, KIPPs first response to our recent NEPC study was to declare it outright flawed. KIPP then proceeded to make up every possible explanation they could – every possible “excuse” – conjure every possible out of context – or different context estimate or “fact” to make their case that they in fact spend equal or less than schools in New York City and Houston.

I guess what continues to perplex me most is the stance that KIPP takes whenever anyone writes anything about them, in a report not sponsored by them or by one of their major funders (some of which are quite good).  Whether a descriptive analysis of attrition rates or our analysis of spending per pupil, KIPPs standard response is to deny, deny, deny.

We have not said anywhere in our report that there’s anything wrong with spending more to do a good job – run a good school. It would be preposterous for us to make such an assertion. We have simply tried to lay out a reasonable comparison of what schools are spending, compared to otherwise similar schools. These comparisons are appropriate, and are necessary for making judgments about any marginal benefits that might be achieved by students attending different schools.

We show that part of the KIPP puzzle in Houston is explained by their attempts to provide more competitive front end teacher wages. Nothin’ wrong with that! It’s certainly a logical recruitment/retention strategy. Notably, it would become difficult to maintain these margins as school staff matures. These are issues worth monitoring over time – to see if CMOs entering their second and third decades of operation can continue to hold expenses down by holding staff experience down, while still recruiting and retaining energetic, high quality teachers. I will likely be conducting more extensive analyses of these salary structures across KIPP and other schools in NYC and Texas in the future, and hope to have a more productive discussion on the topic when that time comes.

KIPP argues that we counted all of their centralized expenses against them, and counted NONE against the NYC public schools. This is not true. We actually didn’t count KIPP regional and national expenses that exist beyond what the locals pay in management fees accounted for on their budgets.

Second, as I will show below, even if we count all of the system-wide expenses (& other obligations) of NYC BOE schools, KIPP schools continue to substantially outspend them.

Further, KIPP complains that we include expenses on their KIPP to College program. It’s a program. It’s a support service. It’s an expenditure. Further, even the KIPP schools budgets that don’t include KIPP to college exceed NYC BOE spending. And KIPP plays the usual card, in reference to Houston, not NYC, that they must incur the full costs (from their operating expenses) of facilities, implying that public districts have absolutely no costs of facilities.

Clearly, such comparisons are complicated and we acknowledge as much throughout our paper. Further, we provide substantial detail as to the types of data being compared and potential issues with the comparisons.

New York City

Let’s look first at our New York City comparisons. The data in NYC are pretty good, but because the charter financial reports are not part of the same system as the district school site budgeting data, they are not necessarily designed to be directly comparable. We had removed system-wide costs from the NYC BOE schools, in addition to removing costs for facilities (because BOE also pays for charter facilities), food and transportation, and we removed payments to charters. KIPPs assertion is that clearly if we add back in all system-wide costs NYC BOE schools would be spending at least the same if not more than KIPP schools.  This is especially the case if, as KIPP asserts, that pension costs alone should add $2,200 per pupil to the BOE schools (this is a perfect example of a wrong context number extracted from a different comparison [a good one by IBO]).

Of course, this assertion doesn’t pass a basic smell test even given the information that already existed prior to our report. In the Independent Budget Office report which we cite, the IBO evaluated the comparability of the public subsidy rate of co-located (as with KIPP) charters and BOE schools, finding that the co-located charters had the equivalent subsidy of slightly higher than BOE schools on average district-wide. Note that subsidy rates aren’t expenditures. It’s a different comparison. But subsidy rates provide a starting point for what could be spent. And KIPP was ahead at the starting line, albeit only slightly.

Add to that, the fact that KIPP schools do not serve average special education populations, the major driver of differences in spending across BOE schools (as we validate). Thus, compared to these schools rather than average district-wide, KIPP moves further ahead. Then, I think we all understand by this point that KIPP raises and spends at least some private funding.  Fair enough? We’ve got two reports out on this:

  1. Baker, B.D. & Ferris, R. (2011). Adding Up the Spending: Fiscal Disparities and Philanthropy among New York City Charter Schools. Boulder, CO: National Education Policy Center. Retrieved [date] fromhttp://nepc.colorado.edu/publication/NYC-charter-disparities.
  2. Baker, B.D., Libby, K., & Wiley, K. (2012). Spending by the Major Charter Management Organizations: Comparing charter school and local public district financial resources in New York, Ohio, and Texas. Boulder, CO: National Education Policy Center. Retrieved [date] from http://nepc.colorado.edu/publication/spending-major-charter.

Add their private spending to the already growing margin, and you’ve got a bigger margin of difference in per pupil spending between KIPP schools and otherwise similar NYC BOE schools. On its face, it’s highly suspect for KIPP to argue that they do not spend more than NYC BOE schools.

But, just for fun, let’s rerun the regressions from our report with all system-wide costs added back to BOE schools and see if that puts them ahead of KIPP spending.

Here’s the overall comparison:

Even after adding system-wide costs back into BOE schools, KIPP schools spend more than $3,000 per pupil more than BOE schools.

Now here are the breakout scatterplots, starting with our original:

And then with all system-wide costs added back in to BOE school:

Hmmm… seems that KIPP schools are still significantly outspending otherwise similar BOE schools – about 25% more.

Another really important point here is that none of these adjustments alter KIPP charter spending relative to the other charters. KIPP continues to outspend the other charters by as much as they did in our original analyses.

What we don’t include for KIPP

We don’t include regional (KIPP NY) or national expenditures above and beyond what is covered by the school management fees. We write extensively in Appendix C of our report about these additional expenditures and difficulty in parsing precisely how much was spent by KIPP regional and national organizations and what services were provided as in-kind services to schools. This is a potentially significant break that we give to KIPP, setting aside entirely their centralized costs of the organization (those above and beyond what is covered by management fees).

Texas

It was problematic enough for KIPP to assert that they spend similarly to NYC BOE schools, but it was surely a stretch to assert that they spend similarly to Houston ISD schools which have been significantly constrained under state school finance policies in recent years. KIPP first pulls the facilities cost card to make their case, as usual, implicitly assuming public district facilities to be free. We discuss this issue on Page 49 of our report (and in numerous other locations):

Charter advocates often argue that charters are most disadvantaged in financial comparisons because charters must often incur from their annual operating expenses, the expenses associated with leasing facilities space. Indeed it is true that charters are not afforded the ability to levy taxes to carry public debt to finance construction of facilities. But it is incorrect to assume when comparing expenditures that for traditional public schools, facilities arealready paid for and have no associated costs, while charter schools must bear the burden of leasing at market rates – essentially and “all versus nothing” comparison. First, public districts do have ongoing maintenance and operations costs of facilities as well as payments on debt incurred for capital investment, including new construction and renovation. Second, charter schools finance their facilities by a variety of mechanisms, with many in New York City operating in space provided by the city, many charters nationwide operating in space fully financed with private philanthropy, and many holding lease agreements for privately or publicly owned facilities.

KIPP also argues that their per pupil spending figures are inflated due to spending for growth. Hey. That’s an expenditure. By the way, typically, per pupil expenditures rise with declining enrollment (as the denominator goes down). Yes, there might be scaling up expenditures, but they tend not to have dramatic effect on per pupil expenditures. If KIPP has chosen to pay for redundant administration, etc. in order to support scaling up, then so be it. That’s an expenditure. We would hope to see these expenses level off down the line with additional analyses. We’ll wait and see on that.

But, back to our actual comparisons in Houston. We used two different approaches in Texas. First of all, in Houston, KIPP spending per pupil was much closer than in other Texas cities, where KIPP spending totally blew away district schools spending. But back to Houston. Using current operating expenditures per pupil data for KIPP and Houston schools, we show that KIPP middle schools outspend not only otherwise similar schools in HISD, but the district-wide average operating expenditure per pupil.

Further, we show that KIPP total district (IRS 990) expenditures significantly exceed Houston ISD’s TOTAL REVENUE PER PUPIL, including revenue for retiring debt and maintenance of HISD’s large capital stock.

What we don’t include for KIPP

Again, we don’t attempt to figure out the additional expenses of KIPP national allocated to schools, above and beyond what is paid for from the local/regional KIPPs through management fees to the national organization.

Closing Thoughts

I encourage those interested in these topics to not only browse the abstract of our report, but to also dig deep into the appendices and end notes – which are as long as the report itself. Heck, follow the hyperlinks to the data sources and take your own stab at this stuff. That’s what we need out here – not more excuses and unfounded anecdotal arguments.

I actually hesitate to write about KIPP and perhaps that’s just what they want. Apparently no one should write about them that hasn’t been paid by them to write about the. Those who do should be forewarned that you’ll have to waste inordinate time responding to their complaints – excuses – about what you wrote. As of this post, I hope to be done with this topic.

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Bruce D. Baker

Bruce D. Baker is a Professor in the Graduate School of Education at Rutgers, The State University of New Jersey, where he teaches courses in school finance policy and district business management. His recent research focuses on state aid allocation policies and practices, with particular...