Posted by George Sweeting, May 26, 2010

Buried amidst the bleak news for city schools in the Mayor’s Executive Budget there is one spending category that is growing at a rapid clip: funding for charter schools. And because of the way charter school funding is mandated, it grows proportionately with enrollment even while the budget for traditional public schools, which also have growing enrollment, is shrinking.

The Department of Education (DOE) projects charter school enrollment to grow by 9,400 students next year, up from 30,500 this year—an increase of 30.8 percent. This enrollment growth reflects the planned opening of 29 new charter schools for September 2010, plus the addition of new grades to existing charters as they gradually expand towards their planned grade span. Enrollment in traditional public schools is also forecast to increase next year by 11,600, although in percentage terms the growth is much less (1.2 percent). In the case of charters, enrollment growth results in additional spending by the education department to maintain per capita support. For traditional public schools, other than a broad maintenance of effort requirement for total expenditures and mandates to provide some specific services, there are no explicit requirements to increase spending in line with enrollment and thus per capita spending will fall.

Under the state’s charter law, New York City, as the local school district, must provide charter operators with a flat per student amount for each student at a charter school. The budget assumes that amount is unchanged from its 2010 level of $12,443. (See “Comparing the Level of Public Support: Charter Schools versus Traditional Public Schools” for a discussion of additional resources that the city provides to charter schools beyond the mandated per student payment.) Thus, the enrollment growth increases the identified cost of charter schools in the education department budget by $117 million. The cost of providing mandated special education services to charter school students is also expected to increase by about $10 million this year, which brings the required charter school expenditure for the DOE to $545 million, an increase of 30.4 percent over the amount for 2010.

That $127 million in increased charter school expenses has to be absorbed in a proposed overall Department of Education budget that is virtually unchanged from this year. The budget for school year 2010-2011 shows year-over-year reductions in state and federal aid, and an increase in city support for the DOE that is just enough to offset the loss in state and federal funding, despite growing enrollment and mandated costs, including charter payments. As a result, the portion of the DOE budget used for traditional public schools (i.e. subtracting spending for charters and nonpublic schools from the total DOE budget) will fall next year from 90.2 percent to 88.7 percent.

Looking just at the traditional public school part of the DOE budget, spending will decline by $285 million (1.7 percent). The combination of a smaller budget and higher enrollment results in a $475 (2.8 percent) reduction in per student spending for traditional DOE public schools.

So it is clear that charter schools’ guaranteed adjustment for enrollment growth means that the cutbacks in the education budget has a smaller effect on charters than on traditional public schools. But does that mean that the budget cuts for traditional public schools are greater because of the shift of more money to charters? That depends on how much it costs to educate each additional student in the regular DOE schools—the marginal cost of a student—which is different from the average or per capita cost.

Suppose the increased charter school enrollment (9,400) for next year were instead educated in DOE traditional schools. More students would add to the cost pressure on the DOE budget for traditional schools, but there would also be potentially up to $127 million in additional resources available.

Assuming the additional money was allocated to the traditional public schools, this would likely have a somewhat smaller effect on classroom instruction spending—even with the higher enrollment—than will result from shifting those students and their funding to the charter schools. This is because the marginal cost of adding one student to the system is almost certainly lower than the average cost of educating a student or even the per capita charter school payment ($13,654, counting the required special education services), although how much lower is uncertain.

Operating cost adjustments in response to lower enrollment can take time. The loss even of thousands of students in a single year will not immediately lower the cost of running centralized departments such as human resources, information technology, food and supply warehousing, building maintenance, and the chancellor’s office. Even at individual schools, shifts of a handful of students may not significantly alter a school’s budget until the difference is large enough to trigger the loss or addition of a class section. While these adjustments can be expected to eventually occur, they almost certainly could not occur fast enough to offset the effect of next year’s shrinking DOE budget for traditional public schools.