Pa.’s latest bid to regulate cyber charter schools would lower tuition payments, boost transparency

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HARRISBURG — A bill making its way through the Pennsylvania legislature would cap the amount of money public school districts send to cyber charters and require these schools to be more transparent about their inner workings.

Changing technology and a global pandemic caused students to flock to these fully online, independently run K-12 institutions.

But the state regulations that govern these schools, last updated 20 years ago, did not anticipate the rapid growth of cyber charters — there are 14 that educate more than 60,000 students — or the amount of money public school districts would end up paying in tuition costs.

The guidelines also lack basic accountability measures such as a requirement for public meetings or robust financial disclosures, which critics say leaves the public in the dark about how taxpayer dollars are spent.

Democratic and Republican legislators agree the regulations need to be updated, but say they’re a long way from consensus. Cyber charter supporters and key GOP lawmakers say the flat rate for tuition isn’t sufficient and that the state should invest in public school alternatives, not put additional restrictions on them.

“Cyber charter schools are only open because parents want options for their kids, and that is a far greater accountability standard than anything the traditional public schools face today,” said Matthew Brouillette, a political operative with ties to groups that have directed millions in political spending to candidates who support school choice. “Traditional public schools are failing all around us, and they get more money, not more accountability.”

The bill passed the state House with some bipartisan support — 20 Republicans joined all 102 Democrats in voting yes. But the lawmaker who chairs the state Senate committee through which the bill must pass has not committed to moving it.

State Sen. David Argall (R., Schuylkill) said he would support a bill that makes fewer and less controversial changes first. He did not suggest any specific policies when asked.

“We’re just not going to agree on 100% of any legislation,” Argall said. “If we agree on 10 to 15%, I’d like to get that through then talk about the other 85%.”

A $1 billion price tag

Cyber charter tuition is paid by the public school district of the child enrolled, and it can be expensive: Districts sent nearly $1 billion to cyber charters in the 2020-21 school year, according to Research for Action, a Philadelphia-based nonprofit that studies education policy.

Public school districts receive money from the state, but their budgets are overwhelmingly funded by local property taxes. A Pennsylvania court recently ruled this system is unconstitutional and inequitable.

Only three other states fund cyber charter schools directly through payments from districts. Roughly 20 others appropriate money for cyber charters from state budgets, and the remaining ones use a mix of funds.

The state House bill would significantly change the funding scheme. While money would still come from public school districts, the measure would set a statewide rate of $8,000 per non-special education student. The rate would increase every three years “based on the average rate that school districts raised property taxes,” according to a fiscal analysis prepared for the state House.

The current rate formula varies based on the amount public schools spend on their students and the number of students in a public district who opt to attend a cyber charter daily.

Over 90% of Pennsylvania school districts signed a resolution this year asking the General Assembly to change the funding system for cyber charters.

“These payments are calculated in a manner which requires districts to send more money to charter schools than is needed to operate their programs and places a significant financial burden on districts’ resources and taxpayers,” the resolution said.

State Rep. Jesse Topper (R., Fulton), minority chair of the House Education Committee, said he supports changing cyber charter regulations but opposes the one-size-fits-all statewide rate.

He said there are public schools in his legislative district that pay less than $8,000 per student in cyber charter fees, meaning the legislation would actually cause their costs to rise.

Topper said he’s open to moving away from a system in which public schools are solely responsible for cyber charter tuition. A potential solution, he said, could involve the state adopting some financial responsibility to take away the “toxic nature of the relationship” between public and cyber charter schools.

The state House bill would also substantially change tuition rates for special education students, a particular pain point for public schools that say they are required to send more money than is actually used to educate children.

While special education for public school districts is funded based on the actual costs of services for students with disabilities, cyber charters are funded with the same tuition per special education student, regardless of need.

A lack of transparency

Public school districts function under Pennsylvania’s Sunshine Act. Boards are required to hold public meetings and get input on items such as budgets and curricula before making decisions.

Board members are elected officials who serve four-year terms. They file public statements of financial interest and do not get compensated for their work.

School boards must also adhere to the state Ethics Act and follow certain guidelines if conducting business with the relative of a board member.

Cyber charter schools, on the other hand, are not required to host open meetings or get input on their budget. While they do report certain statistics to the state Department of Education each year, the financial information cyber charters disclose is limited.

Under the state House bill, the operations of a cyber charter board would be subject to the Sunshine Act, and budgets would have to be made public at least 20 days prior to adoption. The public would be able to see five years of annual budgets, tax filings, certified audits, and annual reports.

The bill would also categorize individuals on these boards as public officials, which would subject them to state ethics standards and financial disclosure forms. The boards would need to include at least seven voting members who aren’t related, including one parent of a student enrolled at the cyber charter. Board members would not be paid except for “reasonable expenses.”

“These cyber charter schools have boards, and you don’t really know if people [on the boards] are financially benefiting from decisions they’re making,” said Susan Spicka, executive director of Education Voters of PA, a public school advocacy group. “Temptation without accountability can be too much for some people, there’s just so much extra money for people to misuse.”

The bill would also subject agencies that enter into contracts with cyber charters, including financial management companies, to the Right-to-Know Law.

Unlike public schools, many of which have their own business offices, cyber charters hire financial management companies. Those companies handle millions of dollars in taxpayer funding, but their books can't be reviewed by state officials or the public because they are private organizations.

Former Auditor General Eugene DePasquale, a Democrat, found that one such company was "operating without boundaries or accountability" and that it was unclear what services it had provided. The company had meanwhile been handing out pay raises to executives.

While debating the bill on the state House floor, Rep. Torren Ecker (R., Adams) said the Right-to-Know requirement is too broad — it would include companies hired for construction projects, for example.

The bill would also put new restrictions on cyber charters’ ability to advertise — a significant change, as some of these schools routinely use a chunk of their budgets for self-promotion.

Right-to-Know requests filed by Education Voters of PA show that Pennsylvania’s 14 cyber charters collectively spent $16.8 million on advertising in the 2021-22 school year. Harrisburg-based Commonwealth Charter Academy spent the most: more than $8 million.

The group also found that PA Virtual Charter, based in King of Prussia, spent more than $28,000 sponsoring minor league baseball teams, and more than $130,000 on bus wraps and other transit advertising.

Brouillette, the cyber charter advocate, said those ads are necessary.

“Charter schools only survive if they attract students, and advertising is one way to tell them about that option,” Brouillette said.

Under the bill, all paid media from cyber charter schools would have to disclose that the ads were paid for using taxpayer dollars. Cyber charters would also be prohibited from sponsoring public events.

DaniRae Renno is an intern with the Pennsylvania Legislative Correspondents’ Association. Learn more about the program. Spotlight PA is funded by foundations and readers like you who are committed to accountability journalism that gets results.