Financing public education has historically been the joint responsibility of state and local governments. But while traditional districts have long had access to both state and local sources of revenue, nearly all Ohio charter schools tap state funds alone. The reason: Unlike districts, charters do not have the independent authority to levy taxes on local property. Meanwhile, districts have been loath to share local funding with charters. The only exceptions in Ohio are eleven Cleveland charters, which together received $2.2 million in local revenue for 2012–13 as part of a revenue-sharing plan with the district. As a result, Ohio charters operate on less overall taxpayer support than districts.
Despite the stark fact that charters rarely receive local funds, a few groups are mounting attempts to claim that somehow charters receive proceeds from local taxes. Their claims are false. First, state data contradict any proposition that local funding directly flows to charters. Second, while some charters may receive more state aid than districts, on a per-student basis, this difference in state funding is simply a product of the state funding formula. It is not a result of local funds indirectly going to charters, as some have suggested.
The facts are the facts
Let’s lay out the facts. Practically all public-charter schools in Ohio receive zero funding from local taxes. State law does not give charters taxing authority, so they are wholly reliant on state and federal funds and on charitable donations. Meanwhile, Ohio vests school districts—their boards, specifically—with taxing authority. All districts in Ohio exercise that power, raising funds primarily through property taxes, a portion of which must be approved by voters.
The state’s financial data confirm that charters receive no local revenue. First, Ohio Department of Education data show that charters receive no local tax revenue.[1] Zilch. Goose eggs. Bubkis. In contrast, the state’s 613 traditional districts raised a total of $8 billion in local tax revenue in 2012–13 (click on this link for a spreadsheet containing the local revenue data). Second, consider the Ohio Auditor of State’s database, which posts the financial reports of charters and districts. Charter financial reports show no local tax revenue; for instance, Columbus Collegiate Academy (charter) reported zero local tax revenue for fiscal year 2013. Meanwhile, Columbus City Schools (district) received $363 million generated from local property taxes (the equivalent of $7,300 per student, on top of roughly $5,000 in state aid for a typical student). Tables 1 and 2 below display the revenue side of these organizations’ financial statements.
Table 1: Columbus Collegiate Academy (CCA) – Statement of Revenues, FY 2013
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Source: Ohio Auditor of State, Columbus Collegiate Academy, Statement of Revenues, Expenses and Changes in Net Positions for the Fiscal Year Ended June 30, 2013, pg. 8.
Table 2: Columbus City Schools (CCS) – Statement of Revenues, FY 2013
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Source: Ohio Auditor of State, Columbus City Schools, Change in Net Position (Fiscal Year 2013), pg. 8.
State taxes fund charter schools
Despite these straightforward facts, claims have been made that charters somehow receive local tax revenue indirectly. The argument goes something like this: Charters receive more state funding per student than districts; therefore, local taxes indirectly “subsidize” those charter schools.
The first part of their claim is typically true because the state adjusts the amount of aid that a district receives based on its local wealth. The adjustment is made to ensure that greater aid goes to districts with fewer local resources (property and income wealth).
Consequently, relatively affluent districts may receive less state aid than the charters who enroll children from that district. Consider the following example: Bexley School District (a high-wealth district near Columbus), receives roughly $3,000 per student from the state. But a charter that enrolls an average student from Bexley would receive approximately $6,500 in state aid. Bexley, however, raises around $12,000 per student through local tax efforts, whereas charters drawing students from Bexley receive no local tax support.
(In contrast, the amount of state aid appropriated to districts and charters becomes more comparable in higher-poverty areas. For example, Columbus City Schools receives approximately $5,000 per pupil from the state for a typical student, while charters receive about $6,500 per average student. But again, local revenue does not flow to Columbus charters.)
Because charters are shut out of local tax revenue, they have zero local wealth to fund their students’ education. Thus, the state makes no wealth adjustment when determining charters’ amount of state aid.[2] That is why some charters may receive more state funding than their neighboring district. The state—note, the state—funding program partially compensates for charters’ absence of local tax revenue.
The state does not fully offset the absence of local revenue; in fact, the most recent research shows that Ohio charters receive on average roughly 22 percent less overall taxpayer support, and the disparity is even greater in Cleveland and Dayton (over 40 percent).
Yes, districts can feel a fiscal pinch—through state revenue loss
Ohio charters are entirely funded by state and federal funds and non-tax contributions—not local taxes. As such, a district’s local revenue does not vary based on the number of students attending a charter. Think of it this way: If every student were to leave Columbus City Schools for charter schools tomorrow, the district would still be entitled to the full allotment of local tax revenue. However, districts’ state revenue does depend on student enrollment, and that is how charters could have a fiscal impact on districts. But note: it’s a similar impact that any student out-migration would have on a district, such as when families move to the suburbs, to private schools, or to another state.
A district can respond to shrinking state revenues due to enrollment decline in several ways, including altering their cost structure or winning back the students who left. Obviously, these options are not easily done; but to survive, school districts—like any organization—must adapt to changing external conditions. The presence of competition—including, but not limited to, charters—should motivate districts to improve organizationally, ideally working toward greater efficiency (in terms of resource allocation) and effectiveness (in terms of service delivery).
Conclusion
Charter schools in Ohio do not have access to local tax revenues by any mechanism. Instead, charters are almost wholly reliant on state funding. Anyone who claims that charters receive local tax revenue (save for the exceptions in Cleveland) is simply making a false assertion.
Current policy results in less overall public financing for the education of thousands of needy children who attend charters. Inequitable funding also places charter schools at a disadvantage in teacher pay and in obtaining facilities. Finally, current school funding policy forces taxpayers to direct their tax payment to the district—even if that district has failed as a public institution for decades or if taxpayers have strong preferences for charter schools.
Ohio policymakers and the public need to be informed when evaluating spurious claims that suggest public charter schools receive more funding than traditional public schools. Moreover, serious thought should be given as to whether the education of a certain category of students is worth less; unfortunately, that’s exactly what is happening to charter school students in Ohio.
[1] The only exemptions are the eleven Cleveland charters mentioned earlier, plus six charters that reported a trivial amount of local tax revenue (less than $6,000 total).
[2] Unlike districts, charters do not have the main component of their state aid adjusted (the “opportunity grant”) or their categorical funding adjusted (e.g., additional LEP and special-education funding). However, charters’ “targeted assistance” (a smaller component of the funding formula) is adjusted in the same way as their serving district(s).
