Chapter 4: Charter School Expansion and the Fiscal Collapse of Public School Districts

Over the past three decades, policymakers and educators have debated the merits of charter schools, focusing on their impact on the quality of education for their own students and for students enrolled in their host school districts. But as the charter industry has grown, it poses a new and critical challenge for education policy makers: The very real possibility that the unchecked expansion of charter schools will cause the fiscal collapse of public school districts, leading to complete privatization of K-12 education.

As the charter industry has grown, public officials across the country have become increasingly concerned with the sector’s impact on public school districts. A 2013 report from Moody’s Investors Service, for instance, warned that charter expansion threatened school districts’ viability in a growing number of cities, as “charter schools … pull students and revenues away from districts faster than the districts can reduce their costs” (Moody’s, 2013). In response, a series of studies have been carried out by both academic scholars and consulting firms aimed at the same question that this chapter seeks to address. Because school funding formulas differ from state to state, and because the studies were conducted at different points over the past decade, the results vary significantly. Yet in every case, studies found that charter growth has caused school districts to suffer much more in lost revenue than they are able to make up in reduced expenses—resulting in large net shortfalls for district students. In the smaller cities of Buffalo, New York and Durham, North Carolina, the net impact of charter schools was estimated as a loss of $25 million per year to the school district. In Nashville, Tennessee the loss is approaching $50 million per year. And in Los Angeles—the nation’s second-largest school district—the net loss is estimated at over $500 million per year (Bifulco & Reback, 2014; Ladd & Singleton, 2018; MGT Associates, 2014; MGT of America Consulting, 2016). While the magnitude of charters’ impact obviously varies by size of district, when we control for district size by converting the findings into impacts per charter students, all of the studies described above found the net loss to school districts for each student who moves from a district to charter school to be somewhere between $3,100 - $6,700.