Wednesday, April 13, 2011

Charter Schools and their Effects on Public School Costs

In 1991 the state of Minnesota became the first state to begin the charter school movement. Today in Minnesota there are 149 charter schools who enrolled 35,000 students in the 2009-2010 school year (MN Association of Charter Schools). Currently in the United States charter schools are getting more attention as movies such as Waiting for Superman document the shortcomings of the U.S. education system. As the number of students who choose to attend charter schools increases, there are major implications for both traditional school districts and the state of Minnesota's education finance system.

Charter Schools and Minneapolis Public Schools

Schools in Minnesota get the majority of their funding from the state, who primarily allocates money to public schools based on student enrollment. Many charter schools enroll children that would have otherwise gone to a traditional public school, which reduces the number of students enrolling in these schools. This can have a significant effect on the finances of traditional public schools.

The Minneapolis Public School (MPS) system, for example, had an almost 30% decline in enrollment in the last decade. This precipitous decrease has left MPS in a financial disaster due to high fixed costs and vacant building costs (MDE). The cause of this decline is partially due to charter school growth -- there are an estimated 11,000 students enrolled in charter schools in the city of Minneapolis (I added up the enrollment #'s from the MDE and MN Charter School Association websites). While some of the Minneapolis Public School's loss is due to demographic changes and enrollment attrition from other traditional school districts in the area, charter schools certainly played a part in exacerbating their current financial circumstances of MPS.

This example highlights how charter schools may affect some traditional school districts in the short-term, as rapid enrollment changes create financial issues for school districts with large student declines. Charter school proponents cite increased competition as a major benefit of school choice because it encourages school districts to improve their educational outcomes. While I agree it is true that the charter school movement awoke some public schools from complacency, a side effect of this competition is the financial deterioration of traditional school districts who 'lose out' to charter schools. In other words, in some instances charter schools are diverting resources away from traditional schools.

Changes at the Individual School Level

The proliferation of charter schools also brings into light two large differences in how education funding is spent compared to traditional public school districts. The first difference is teacher pay. A Minnesota Association of Charter Schools survey in 2008 found an average licensed charter school teacher makes $46,792 in total compensation (salary+benefits) (MN Association of Charter Schools). Assuming benefits+salary is 1.5 times larger than the average salary charter school teachers are making a bit over $30,000 in salary alone. In contrast, the average union teacher (all traditional school districts have unionized teachers) had a salary of $51,938, which does not take into account benefits (Education MN).

This indicates that traditional public schools are spending proportionately more on their teachers on a per teacher basis than charter schools. While charter schools may spend less because they hire teachers with less years of experience, the average first-year teacher at a unionized public school still has a salary of $33,039 (Education MN). Unless all charter school teachers are first-year teachers (which I doubt), the labor input of teachers at charter schools is less per teacher than at traditional public schools.

The second difference is district-wide administration costs. Typically charter schools are singular schools with small numbers of students. Although they are small they require all the administrative necessities to run the school such as an IT department and administrative staff. With fewer students the charter schools can't spread the costs of district administration across a large number of students. In contrast, traditional school districts usually have multiple schools and hundreds if not thousands of students, permitting economies of scale and lower administrative costs.

To highlight this with an example, in the state of Wisconsin school districts with 500 students or less had an average per student administrative cost of $1273 while school districts with over 4,000 students had an average per student administrative cost of $900 (Ashland Current). This indicates that charter schools, because of their size, utilize higher per student amounts towards administrative costs than medium to large traditional public school districts.


The rise of charter schools have impacted the enrollment of traditional public schools, creating fiscal problems for those which experienced large declines in enrollment. The Minneapolis Public School system is a good example. In terms of costs, charter school spend less per teacher than traditional public schools. At the same time, charter schools spend more on administration because their small size.

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