Charter School Funding Explained
Like traditional public schools, charter schools in the United States are tuition-free. However, charter schools are different in that they are independent of the school districts in which they reside. Therefore, the ways in which charter schools secure funding at the state and federal level can be somewhat complicated. Below, we break down the most common ways that charter schools get funding, from federal and state governments to private grants, donors, and financing sources.
At the federal level, charter schools are eligible for specific categorical funding such as Title I and Special Education monies. Title I often refers to the part of the Elementary and Secondary Education Act (ESEA) encompassed in Title I, Part A, which offers nationwide educational aid either directly to schools or through local education agencies (LEAs). Title I allows charter schools to get funding assistance for schools with a high number or percentage of (often academically challenged) pupils from low-income families. These funds are used to ensure that all students are able to meet the academic standards of each state.
Charter schools also get funding through federal grants that can assist new schools with startup costs as well as help existing schools in a variety of ways. This may include acquiring, constructing, or fixing facilities, technical assistance, or replicating and expanding established high-quality charter schools. However, federal money is often distributed on a reimbursement basis which means the school has to spend the money first and then get the funds.
How charter schools get funding is determined by each state’s laws, which can be wildly different between individual states and even between counties or districts within the same state (for a more in-depth description, check out this detailed state-by-state comparison).
In most cases, where charter schools get their public funds is based on per-pupil revenue according to enrollment (often called the average daily attendance, or ADA). However, the amount of money received for each student usually does not include operations expenses because most charters are not eligible to receive the residential tax dollars that districts collect. Also, many states do not provide funds to charters for facilities acquisition and maintenance.
So where do charter school get their funding at the state level for facilities costs? For new schools, some states offer startup and planning grants that can be used for constructing new schools or renovating existing spaces.
In other states, any charter may be eligible for tax-exempt bonds, tax-exempt financing, or low-interest loans. As with general funding, there is a wide variety of schemes for how charter schools get funding for facilities that differ greatly from one state to the next. If you are interested in more details, check out this brief summary of state-by-state facilities funding.
Funding Allocation Formulas
In general, states use one of three formulas to determine how charter schools get funding for each student enrolled at the school: per-pupil revenue of the district in which the student lives, per-pupil revenue of the district in which the charter school authorizer is established, or via a statewide per-pupil allocation. Each are described below.
Per-Pupil Revenue Based on Student’s Residence:
- It doesn’t matter where the student goes to school; whichever school she attends will receive the same for her
- Schools receive different amounts for different students
- Sometimes this motivates schools to enroll students from high-revenue districts
Per-Pupil Revenue of the Authorizer
- The authorizer is often the district; in this case, if the student goes to a school in his district, then the revenue would be the same as above
- If the authorizer is not the district or the student attends a school outside his district, then the amount would be different than above
- A potential negative result of this method is that schools could look to be authorized by an authorizer in a high-revenue district.
Statewide Per-Pupil Allotment
- Funding is simply divided by the number of students in the entire state and then distributed to all public schools based on attendance
- Disincentivizes schools to open in high-needs districts
Supplementary State Funds
Additionally, charter schools can get funding increases for students enrolled at their schools who may be physically or mentally handicapped, disabled, or some other impairment.
Charter schools can also get funding outside the public sphere, and this is frequently necessary as public revenues often falls short. Sources of private funding include:
- Individual donors
- Board members
- Foundation grants
- Private loans
- Fundraising events
Secure Additional Funding with CAM
Charter schools get their funding from a wide variety of sources, not just the public funds which are generally not enough to satisfy their per-student expenditures. When your charter school experiences delays in receiving your state funds or you need quick, reliable access to capital, you can count on Charter Asset Management.
Since 2013, our experience team has helped over 250 schools nationwide receive over $300 million in fast and affordable funding. If your charter school needs a reliable monetary source, we can distribute low-cost funds in as little as two days. Contact us today to learn more.