PRESS RELEASE

October 8, 2003

Charter Schools: Can They Survive in Utah?

Today at a luncheon sponsored by Beneficial Life, Wheeler Machinery and KUER FM90, Utah Foundation released its September Research Report on Charter School financing in Utah. 3,295 students are now enrolled in charter schools in Utah, up from an enrollment of around 1,000 during the last school year.

This report provides an in-depth analysis of the funding for six of the eight original charter schools in Utah as well as comparing that funding to Utah’s traditional school districts. Once federal start-up grants are excluded, as these cannot be used for ongoing expenditures, total per-pupil funding at Utah’s charter schools is $4,822 compared to an average of $5,609 for traditional district schools. The report, entitled “Charter Schools: Can They Survive in Utah?” should accompany this release, if not, it is available at http://www.utahfoundation.org/reports.html.

Speaking of the findings in this report, Senior Research Analyst Janice Houston said, “We found many pressure points on charter school finances, any one of which may cause a charter school to close. Some schools in Utah are facing a combination of these pressures and it seems likely that they may be forced to shut their doors.”

Ms. Houston added, “The largest stressor seems to be charter schools’ inability to borrow money either in the public or private sector to finance facility construction. This inability to borrow is brought about because of charters’ uncertain legal status-they are neither a truly public entity or a truly private one and the risk to lenders that the schools may fail or the state of Utah may abandon the experiment.”

Findings in this report include:

• Changes made to charter school financing during the 2003 legislative session have created unanticipated market outcomes, meaning that charter schools in high-property tax districts are underfunded relative to surround district schools while those charter schools in low-property tax districts are overfunded relative to surround district schools. This may created an unintended consequence of having charters saturate low property-tax districts and neglect students in other areas.
   
• Districts experience a revenue loss of at least $2,874 when a student in grades 1-12 leaves a traditional school for a charter school. However, districts experience little cost savings as many of their operating costs are “fixed”. For example, a whole classroom full of students would need to leave for charter schools in order to eliminate one teaching position.
   
• Charters have several challenges to their viability in Utah. These include the differentiated weighted pupil unit (WPU) that state funding is calculated on; an uncertain legal status that does not allow charters to access traditional forms of public or private finance for capital projects; the loss of “angel” investors, those that provide funds, facilities or the parents that donate time towards the success of their students; and finally economies of scale. Utah’s education system is not set up for small schools to be financially independent.
   
• The differentiated WPU is calculated under the assumption that it costs more to educate high school students than elementary students. While this may be true in other parts of the country, Utah has two factors that keep the costs of high school students low. One is the cultural norm of allowing release time one period a day-this allows districts to defray the costs of facilities and teachers were all students on campus for all class periods. The second is the built-in mechanisms within Utah’s public school financing system that take into account the added burden high schoolers place on funding.

Utah Foundation is a nonprofit, non-advocacy research organization. Our mission is to encourage informed public policy making and to serve as Utah's trusted source for independent, objective research on crucial public policy issues.