How Are Charter Schools Funded? Answering Some of the Complex Questions Around Charter School Money

The charter school movement has exploded in the United States over the past few years. According to the National Alliance for Public Charter Schools, enrollment in charter schools more than doubled over a ten year period. In the 2006-2007 school year, enrollment was estimated at 1.2 million. During the 2016-2017 school year, that number ballooned to 3.1 million.

As enrollment continues to grow, charter schools are trying to keep up with demand. The same study from NAPCS shows that 73 percent of adults with school age children want more charter schools to open so more students can enroll in them. With so many people seeing the benefits of charter schools, the need for more to open is more urgent than ever.

There are many steps to opening a charter school, and one of the largest hurdles is answering the fundamental question of how your charter school will be funded. It’s a complex question that lacks simple answers, yet it is one that is worthy of exploring. Consider some of these issues:

1. Understanding variables by states

Currently, there are 44 states (as well as the District of Columbia) which allow charter schools. Each of these states have their own laws dealing with the school’s charter, as well as how charter schools are funded. Although there are many variables at play between these states, most of them have a few key areas in common.

State education funding: Each state has a certain amount of funds in their budget earmarked for education. This funding is then passed on to school districts through complex formulas. In general, each school receives a certain amount of financial aid from the state for each student they have enrolled.

Although charter schools are public schools, many states do not allow charter schools to receive the same amount of aid per student that a typical public school would receive. In fact, the Center for Education Reform estimates that charter schools only receive 61% of funds on average from the state per student that typical public schools obtain. This can create funding issues for some charter schools.

Government bonds: Taxpayer funded bonds are often used for capital improvements on school buildings. These allow public schools to make renovations and build new buildings. However, these types of bonds are not typically available to charter schools. This can create an increased burden on the school to obtain financing for improvements. Either there’s no access to this line of funding, or bonds will be available but at an interest rate that will not be advantageous to the school.

2. Utilizing private fundraising opportunities

When researching how charter schools are funded, you’ll start to see that some of the answers vary from traditional public schools. One of the methods of charter school funding is private fundraising. Although certain groups are able to fundraise on behalf of a public school on a limited level, this money is rarely used to fund the general operation of the school. However, charter school fundraising can work much differently.

Again, understanding that there can be large variations in laws between states, typically there are more opportunities (and more need) for charter schools to take part in private fundraisers. Creating a network of one-time, as well as long-term benefactors can be a key to stability in charter school funding.

Additionally, because facilities are not often readily available for charter schools in the same way they are for typical public schools, fundraising can be key in acquiring property, buildings, vehicles, or other large-scale purchases. Obtaining these items through private fundraising (items that typical public schools have provided for them by their school district) is often a necessity.

3. Funding via grants

Although traditional public schools apply for grants, they can take on an even more significant role for the charter school. Grants for charter schools can be broken into two distinct categories.

Startup grants: Because of the significant cost of starting a charter school, many states want to see a base of funding before a charter will be granted. Since the potential charter school does not have the same resources as the typical public school, this can be a great hardship. However, there are many startup grants available to make this process much easier. Until the state can clearly see how charter schools are funded, they rarely will give their blessing. So, receiving a startup grant is often a game-changer for those who are attempting to open a new charter school.

Miscellaneous grants: After the charter school has successfully opened its doors, receiving grants is still advantageous. Whether the funds are applied to the overall budget or to a specific project, most charter schools see the need to continuously search and apply for grants. Working with an experienced grant writer can be a vital asset to the school in these situations.

4. Work with charter school funding experts

Another answer to the question of how your charter school will be funded can be found by working with financing experts in the industry. With so many intricacies on the state and district level, working with a team that can help you navigate these issues is a must. A misstep in this area could trigger a lack of crucial funding and, in some cases, lead to a school losing its charter.

At Charter Asset Management, we make it our business to understand the charter school financing landscape from state to state so we can help decision-makers receive the funding they need, right when they need it. Contact one of our representatives today to see how we can help you find solutions to your charter school funding questions.