How do weighted funding formulas affect charter school enrollments?

Study: "How Do Weighted Funding Formulas Affect Charter School Enrollments?" 

Author: Paul Bruno (University of Illinois at Urbana-Champaign)

This study was presented at the American Educational Research Association's 2021 Virtual Annual Meeting.

Main Findings:

The adoption of a school funding system in California that increased revenues for schools enrolling higher-need students led to an increase in the rate at which charter schools enrolled low-income students.

This effect was concentrated among charter schools initially enrolling low-income students at relatively low rates, suggesting that some charters "cream skim" high achieving, wealthier students, but that such behavior also can be mitigated.

Details:

For many, the expansion of charter schooling since the early 1990s has been a cause of concern. Among the major concerns is that charter schools will "cream skim" high-achieving, wealthier students from nearby traditional public schools, exacerbating segregation and burdening traditional schools with a combination of falling revenues and higher per-pupil costs.

Most states now adjust school funding to account for the costs of additional educational needs that certain groups of students are thought to have. These weighted student funding systems (WSF) differ in terms of which student characteristics are weighted, but additional funding weights are commonly given to students who require special education services or are English language learners or low-income.

In the study, the author analyzed the effects of a WSF policy implemented in 2013 in California that plausibly changed the incentives for charter schools to enroll disadvantaged students without a similar change of the incentives for students or their families to enroll in charter schools. The author looked at all charter schools in the state, without distinguishing nonprofits from for-profits.

With the adoption of the Local Control Funding Formula in 2013, weighted funding for low-income students increased significantly, increasing per-pupil funding provided to schools for eligible students by 300 percent or more.

The author examined changes in the gap between charter schools and traditional public schools in the share of students eligible for free and reduced-price lunch (FRL) programs, from 2012 to 2017. He found that charter schools with relatively low FRL rates compared to their local district in 2012 gradually increased their FRL enrollments relative to traditional schools in subsequent years.

In 2012, these charter schools had almost 6 percentage points fewer FRL-eligible students than analogous traditional schools (i.e., those with FRL rates below their district average). Despite these traditional schools also gradually increasing their FRL shares during this time, the gap between charter schools and traditional schools shrank in every subsequent year, and by 2017 the gap was statistically indistinguishable from zero.

During the same period, the Local Control Funding Formula did not have the same effect on charter schools that already had relatively high FRL shares. The FRL gap between these charter schools and traditional schools that also started with relatively high FRL shares in 2017 (6.7 percentage points) was only modestly smaller than it was in 2012 (9.7 percentage points) and was slightly larger than the gap in 2013 (5.8 percentage points).

"My results suggest that previous studies on charter school cream skimming may have been too optimistic," said author Paul Bruno, an assistant professor of education policy, organization, and leadership at the University of Illinois at Urbana-Champaign. "If these state funding changes altered enrollment incentives only or mostly for charter schools, and not for families or traditional schools, then my results indicate that many charter schools are avoiding enrolling low-income students."

"The primary implication for policymakers is that charter schools appear to be sensitive to the costs of providing education," said Bruno. "This matters for both the funding and the regulation of charter schools."

The author noted that when designing weighted funded systems, policymakers need to think carefully about which student characteristics should be considered.

"There are some obvious candidates, including eligibility for free lunch or special education or English learner services," said Bruno. "Not only do students with these characteristics appear to have distinctive and costly educational needs, but there is also evidence that they are underserved by charter schools in at least some cases."

The author also noted that policymakers need to ensure that formula weights are large enough to change the behaviors of charter school operators, but also are not so large that they create perverse incentives, such as discouraging schools from declassifying students as English learners.