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Cyber Charter School Funding, Oversight and Accountability

Before the House Education Committee
Sept. 19, 2007

John P. McKelligott Esq., President
William Penn School Board

I want to thank Chairman Roebuck and Chairman Stairs and the members of the House Education Committee for extending this opportunity to us to offer testimony today on issues, particularly, of Cyber Charter School funding. My name is John P. McKelligott, and I am President of the Board of School Directors of the William Penn School District, which is located in Lansdowne, in Delaware County, Pennsylvania. The William Penn School District covers the boroughs of Aldan, Colwyn, Darby, East Lansdowne, Lansdowne and Yeadon; this district serves approximately 5,500 students, covering grades K-12.

The matter of Cyber Charter School tuition payments is a significant issue financially for the William Penn School District, and - as things have come to pass through unintended consequences arising out of school funding established under the Charter School statute - it unfairly (and inequitably) burdens some of the most financially pressed taxpayers in entire Commonwealth. Accordingly, I am appreciative of the opportunity to speak to you today and advocate the cause of our taxpayers and students. In order to set the context, permit me a short description of the William Penn School District.

The William Penn School District, like the rest of Delaware County, is a suburban school district; it is located on the southwestern border of Philadelphia. It was formed as a result of the compulsory consolidation of smaller school districts in the 1970s, but its constituent communities are older, most of them having withdrawn from Upper Darby Township in the 1890s. The Boroughs of Darby and Colwyn are older yet, dating back to the days of the William Penn land grants in the 1600s. Like many communities in eastern Delaware County, the boroughs of the William Penn School District have experienced population shifts in recent decades: although these communities still have significant established (and aging) middle class populations (often Catholic, many having had children in the parochial schools), the minority population is growing significantly. The William Penn School District now has an 84%+ minority student population, with significant ESL and ELL needs (often those needs are associated with West African immigrant communities which have grown up in Darby and the other Boroughs; many of the members of these communities are refugees, fleeing the civil wars in Liberia and Sierra Leone).

The District has a growing poverty quotient, with increasing numbers of children receiving free and reduced lunch services. As of May, 2007, 65% of the District's students were receiving such services. The figure has, of course, been trending upward in recent years. Further, the District is serving a significant special education/special needs population. During the years between 2001 and 2006, approximately 20% of the District's children were identified as having special needs. The District has, in response to the financial and academic pressures represented by these figures, implemented more rigorous procedures for graduating students back into the regular education population and new procedures for reevaluating and identifying students. Nevertheless, our special needs population is still projected at 16.8% for this year - 2% over the state average.

With these evident high needs, the District is nonetheless financially pressed, as its tax base consists largely small residential properties (many of which are owned by senior citizens living on fixed incomes). In the 1890s, the communities that seceded from Upper Darby Township (the same communities that now form the bulk of the William Penn School District) were the residential communities - the industrial and commercial areas, which would ordinarily supplement the school tax base, were thus unwittingly excluded from the future district's tax base by being left behind in Upper Darby. The consequences of this series of historical events is reflected the William Penn School District's well established spot in the list of the top ten districts (out of 501) in the Commonwealth for school tax effort (as measured by equalized mills ). Last year, the District was 6 th in the Commonwealth. I have been a member of the Board of School Directors for 12 years. Never in that 12 years has this District fallen out of the top ten in the Commonwealth in this unfortunate statistic. Rather, our standing has fluctuated between 4 th and 8 th every year, depending upon the state of the schools budget passed. This is tax burden at such a high level that it can truly be said to depress the economies of these six boroughs and to thereby oppress the citizens.

Truly, the William Penn School District is the "Poster Child" for property tax reform. Although that is a topic for a different discussion, this fact highlights the financial burden posed by the funding of education for cyber charter school students, and it cries out for equity in the allocation of such costs among the school tax paying population within the Commonwealth.

The William Penn School District, at least since the 1990s, has struggled academically - both in general terms and specifically in terms of PSSA scores. No one would contend that the District has succeeded over the years in coping academically with increasing poverty and changing demographics. Nevertheless, after years of struggle, the District has changed its ways, and it is now an improving school district. After an intentional campaign four years ago to audit our curriculum, to replace (and actually implement) a shared curriculum K-12, to change our leadership beginning with the Superintendent and to step up actual accountability across the board within the District's professional staff, significant academic progress has been achieved. Thus, in the 2005-2006 school year, the District for the first time made Adequate Yearly Progress (through safe harbor). Disappointingly, last year, the District just missed making AYP due to problems with a small special education population in one school and due to a difficult year at the high school (a problem which we are moving to correct); however, the actual number of schools making AYP outright did increase this past year.

In this context, where our mission is to well educate our student population, it is not fitting that the William Penn School District should flee educational competition, whether from charter schools or from cyber charter schools. However, where there is competition, it should be competition on a level playing field, and the competition should not oppressively burden the District's taxpayers. In this arena of educational competition and school budgets, the cost of cyber charter school tuitions is a significant item. In 2006-2007, the William Penn School District's payments for cyber charter school tuition amounted to $1,054,810. This sum has been growing over the years, and the end is not in sight. This is obviously a budget line item that represents a tangible impact upon our taxpayers. If it actually represents the cost of well educating these students, then there would be little cause for complaint. But that is hardly the case.

Examination of cyber charter school budgets reflects the surplus the present reimbursement system accomplishes for them. At the end of the school year, every school (whether public, charter or cyber charter) compares budgeted expenditures with income and computes its annual surplus and fund balance (accumulated annual surplus). Given the William Penn School District's high needs and meager tax base, its annual fund balance/surplus amounts to One Half of One percent (0.5%) on a good year. By way of contrast, compare the Undesignated Fund Balances of Pennsylvania's 12 cyber charter schools for the 2005-2006 school year :

•  21 st Century Cyber Charter School - 31.63% fund balance

•  Achievement House Charter School - 4.54% fund balance

•  Agora Cyber Charter School - -98.13% fund balance

•  Central PA Digital Lrng. Foundation Charter School - 36.50% fund balance

•  Commonwealth Connections Academy Charter School - 16.52% fund balance

•  Midwestern Regional Virtual Charter School - 4.21% fund balance

•  PA Learners Online Regional Cyber Charter School - 38.04% fund balance

•  Pennsylvania Cyber Charter School - 37.64% fund balance

•  Pennsylvania Distance Learning Charter School - 3.29% fund balance

•  Pennsylvania Leadership Charter School - 12.46% fund balance

•  Pennsylvania Virtual Charter School - 15.61% fund balance

•  Susq-Cyber Charter School - 49.32% fund balance.

 

The picture here for cyber charter schools is a picture, speaking in general terms, of a lavish budgetary surplus through the present reimbursement system, when tuition receipts are compared with the apparent actual cyber education costs. While no one would really complain with a school's achieving a budget surplus of 3-4%, and while it is apparent that even a cyber charter school can occasionally run into difficulties sufficient to incur an operating deficit, the overwhelming proportion of cyber charter school operating experience, as reflected in these budgets, shows operating surpluses ranging from 15.61% through 16.52% and on up to 31.63%, 36.50%, 37.64%, to 38.04% and even 49.32%. It is understandable that such budgetary surpluses might arise as an unintended consequence of a funding system based on the model of a "bricks and mortar" charter school because obviously no one was thinking about cyber schools when the charter school legislation was under legislative consideration. Equally, however, actual costs of an education necessarily are lower for cyber schools than for regular charter schools if only because there are no "bricks and mortar" issues to deal with (as in the case of both regular public schools and ordinary charter schools). In Pennsylvania, the reality of lower actual cost of a cyber education is demonstrated by the comparative budget surplus/fund balance figures cited above.

With cyber charter school budget surpluses falling commonly within the range 15%+ to $49%, it is fair to characterize these operating results as a "windfall" to the cyber charter schools, and it is equally fair to question whether the intention of the charter school legislation was to confer this sort of "enrichment" of those operating these cyber charter schools - particularly, "enrichment" paid for by the hard-pressed taxpayers of financially challenged districts such as the William Penn School District. It is my understanding that the intention of the charter school legislation was to sponsor competition in education, offering more choices to parents seeking different or better educational opportunities than those offered their children by the regular public schools. That is indeed a worthy goal, and I am not here today to quarrel with that objective; nor am I here seeking to shield my school district from competition. It is the students from our communities who are to be the beneficiaries of the education system, and it is the public school district's place to improve its own program sufficiently to be able to compete successfully in the educational marketplace to better serve its own children.

Competition, however, implies a certain level of fundamental fairness in the rules of the game, and financing is important. If educational competition is important, and if the William Penn School District is reforming itself to better compete and to more successfully serve its students (and it is ), then the taxpayers who support its programs should not also be taxed to support the "windfall" or "enrichment" portion of the operating surpluses so many cyber charter schools have been achieving under the present system.

On behalf of both the taxpayers and the children of the William Penn School District, I urge you to revise the present funding system for cyber charter schools to relate tuition reimbursements for cyber charter school students more realistically to actual cyber school operating costs and to reduce the potential for the "windfall" "enrichment" operating results which the unanticipated consequences of the present funding system are generating. Fair competition in education, with a more level playing field, should benefit the education programs offered to children in this Commonwealth, and reducing the tax burden of posed by the "windfall" aspects of these cyber charter school operations is the right thing to do - particularly in the face of the real and legitimate grievances of taxpayers such as those in the William Penn School District.

Thank you for your attention.

Our special needs population for 2001-2002 was 21%; in 2002-2003, it was 21.2%; in 2003-2004, it was 21.7%; in 2004-2005; it was 23.6%; in 2005-2006, it was 20.6%; and in 2006-2007, it was 19.8%.

This statistic compares tax burden with ability to pay, and it ranks all the School Districts in the Commonwealth in terms of tax effort to support the public schools.

In 2003-2004, our cyber charter school tuition payments were $235,009; in 2004-2005, this figure was $565,086; and in 2005-2006, this figure was $722,746.

For the school year ending on 6/30/03, we had a fund balance of $361,064 on a budget of $57,283,410; this was a surplus of 0.63%. For the school year ending on 6/30/04, we had a fund balance of $62,618 on a budget of $62,827,541; this was a surplus of 0.099%. For the school year ending on 6/30/05, we had a fund balance of $277,572 on a budget of $64,106,559; this was a surplus of 0.43%. For the school year ending on 6/30/06, we had a fund balance of $357,280 on a budget of $69,126,612; this was a surplus of 0.52%.

These figures are taken from the Second Quarterly Report of the Task Force on School Cost Reduction - May 16, 2007.

Note, for example, that, for the 2005-2006 academic year, the William Penn School District made AYP (through the safe harbor provisions). Those results were roughly comparable to the results achieved by the top 2 or 3 cyber charter schools in the Commonwealth, and these results were superior to the results achieved by the other 8 cyber charter schools. See the 2006 AYP Status results comparing Cyber Charter School results with Bricks-and-Mortar Charter School results (copy attached); these results were published by the Pennsylvania Department of Education.