While the Charter formula for regular education students is relatively straightforward, the formula for special education students has several provisions that cause unintended consequences which are extremely detrimental to districts and which give charters unexpected windfalls, entirely unrelated to reimbursing them for their costs.
The current Charter formula is based on equalizing the playing field with the district from which the student comes, rather than on a basis of reimbursing the charter for its actual cost. But on that basis—equalizing funding with that of the District—the charter/special education funding interaction is especially deficient, for it in fact gives the charter school a large bonus over what is available for the district special education student.
The problem starts with the fact that the District receives special education funding from the state on a flat per capita basis assuming every district has the same proportion of special education students: 16 percent. The state takes (or took, in 2009, the last time it changed the formula) the enrollment of the district, multiplied it by .16, and then by the per-capita stipend. Since most urban districts have more than 16% of their students enrolled in special education, this means they get less than the per-capita amount for each special education student they actually have. And since the state per-capita stipend is only a small share of the actual per special ed student cost, the urban districts with a higher percentage of special ed students have to pick up a higher percentage of the cost from their own funds.
The charter school from that urban district receives its funding for each special education student it takes based on a fantasy number: the actual cost the district spent for all of its special education students divided not by its actual number of special education students but by the artificial number that 16%of its enrollment would be. So if the district has more than 16% in special ed, the total cost is divided by a smaller number of students than were actually being paid for and thus the cost per student looks substantially higher. And it is that higher cost per student which is passed on to the charter. So Chester Upland, for example, last year paid $24,528 to its charters for each special ed student while it actually spent $20,527 per special ed student, a $4,000 difference for the charter over the district.
This artificially high payment to the charter school has the consequence that it becomes profitable for the charter to enroll students with disabilities, particularly with moderate low cost disabilities, since it is getting paid on the basis of the students with high cost disabilities who continue to be educated by the district or in special out of school placements, all of whom are included in the cost base used to determine the charters’ payment (reimbursement would be the wrong word since there is no calculation of the charters’ cost in the formula.)
A second consequence is that the district has less money to pay for its own students, because under state law the payment to the charter school comes first, and the district gets what is left over. In the Chester Upland situation last year, every penny of the state special education subsidy went to the charters and none was left over for the District, which paid for its special education costs entirely from locally raised funding plus a small amount of federal special education funding.