Reserve Funds – Charters vs. School Districts

Dear Legislators,

Governor Wolf in his budget proposal stated:

“Reimbursement based on audited costs. By the end of the 2013-14 school year, charter and cyber charter schools had amassed undesignated, unreserved fund balances of more than $156 million because they collected more in tuition revenue than they actually spent on students. The budget includes a requirement for an annual reconciliation whereby charter and cyber charter schools will refund money to their sending school districts if the charter school’s audited expenditures are less than its tuition revenue.” (continued)

$156 million – that sounds like a lot of money.  It also seems fair that if charter schools are not using this money, it should be returned, right?

Not so fast.  $156 million for 127,599 students (according to the PA Department of Education – 13-14 PDE website) turns out to be $1,223 per student.

Compare that to the $3.8 billion public schools across Pennsylvania held in unreserved funds in 2012.  The Pittsburgh School District topped the list with $148.9 million in reserve funds!  These 500 school districts held in unreserved funds an average of $2,111 per student!

There is another significant difference.  Traditional school districts tax their citizens in advance of the school year and penalize them significantly if they do not pay their taxes before school starts in the fall.  Charter Schools receive the money for their students from the district (or from the state) one to two months after the school serves the student.

So, before the doors open in September, the home school district has in the bank over $14,000 plus the left over $2,111 fund balance for each student (total $16,111).  The charter school, however, may have $0 in the bank for that same student.  Why?  Because the so called “fund balance” may actually be money that the home school district owes the charter school and will not pay the charter school for 30-60 days and the charter school does not get to bill the home school district for a year’s worth of service in advance.  It may bill only for the actual time the student is enrolled in the charter school.

So, what often happens is that home school districts tax their citizens in advance, put the taxes in a bank account and draws interest all year long on that principal.  Charter Schools, however, must take out loans based on money that the school districts owe them in order to make payroll and must pay interest on these same loans.  How ironic is it that a PA Charter School is making interest payments to the same bank that is giving that same interest to the home school district for that same money!

My question is simple.  Who needs the “left over fund balance” more – the PA Public Charter School or the Home PA Traditional School District?

I have another question.  Why is the governor not demanding that the school districts return their “fund balances” back to the taxpayers?

Dr. Jim Hanak. CEO

PA Leadership Charter School