Philadelphia City Controller Alan Butkovitz released a report Tuesday calling for sweeping changes in state law to lessen the financial impact that the city's growing number of charter schools has on the School District and taxpayers.
Butkovitz's office has previously released reports that criticized the district's oversight of its 86 charter schools and detailed cases of possible fraud in some. The new report, he said, examines charter schools as a factor in the district's continuing financial crisis.
"Charters are having a substantial financial impact," he said. "It's time to revisit that and make sure that it doesn't become institutionalized as an 'us vs. them' war."
District spokesman Fernando Gallard said, "The issues highlighted in this report are the same issues that the district has been underlining for the last two or three budget years."
There is no question, Gallard said, that "charter school costs have increased and continue to increase in a way that puts financial pressure on the traditional public schools."
While charter school advocates have said the district saves money when students attend such schools, independent analysts such as the Boston Consulting Group have found that the district is left with continuing costs for facilities, pensions, and transportation even after students transfer to charter schools.
The report says that "without taking a position as to whether the rapid growth of Philadelphia's charter schools is a net positive or not for the quality of Philadelphia's educational system, it seems reasonably clear that the geometric increase in the [district's] budget line for charter schools has intensified its financial crisis."
The head of the statewide charter school organization said the report "found nothing altogether new in its research" and said some of the report's recommendations were changes his statewide organization has long supported.
"Pennsylvania can never have a consistently strong charter sector without consistently strong and fair authorizers," said Robert Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools. He said Philadelphia "has historically neglected to invest in a strong and fair charter office, which now oversees the education of 30 percent of the city's students."
He said the report "fails to ask why there has been such a growth in charter schools in Philadelphia and in that failure places the spotlight on the symptom rather than the cause. The fact is, the parents of 61,000 students believe that charter schools provide more opportunity for their child to learn and succeed, and they are voting with their feet."
Among the nation's largest districts, Philadelphia is second only to Detroit in the rate of students attending charter schools.
The report notes that the National Alliance for Public Charter Schools in Washington found that in 2012-13, 28 percent of Philadelphia's 198,929 students were in charter schools. In Detroit, 51 percent of 100,255 students were in such schools that year.
Philadelphia's charter enrollment keeps growing. More than 60,000 city students were in charter schools in December 2013, according to the district. Those students accounted for 32 percent of the 192,136 students attending city schools.
During 2013-14, the district paid the charter schools $8,419 per student, $22,312 for those who receive special-education services.
The report said the charter schools' financial burden on the district worsened when the legislature eliminated the state charter-reimbursement program in 2011. That change has cost the district at least $100 million in state revenue annually, the report said.
By state law, the district is required to pay charter schools before most other expenses, but the district has limited ability to control their enrollment. The state Supreme Court is considering whether state law gives the School Reform Commission power to cap charter enrollment.
The controller's report also found that in 2013, the city's charter schools had a $117 million fund balance at the same time the district faced a $68 million deficit.
Butkovitz said the charter schools' fund balances stemmed from the state's charter-school funding formula, which he said has little relationship to what the schools actually spend, and added, "The funding structure is unfair and financially damaging to Philadelphia's education system."
The report said the state formula used to calculate payments for special education students was another factor in charter-school surpluses.
The charter schools receive a flat rate for special education students, regardless of the type of services students need. The report said charter schools generally have students with less-severe needs and on average spend 50 percent less on each special-ed student than the district does.
Butkovitz's analysis also found that city charter schools on average spend 38 percent less on instruction and support than the district schools. But the average charter school spends twice as much on administrative costs - $1,792 per student vs. $752 per student in district schools.
The report calls for an overhaul of the charter funding formula, return of the state charter-reimbursement program, and increased oversight of district charters.
Butkovitz also recommended developing a budget process that includes the charter schools.
He said the district and the charter office should produce a five-year financial plan with annual updates. That idea would be most effective, he said, if it was accompanied by the creation of an independent fiscal review board similar to the Pennsylvania Intergovernmental Cooperation Authority.
Butkovitz said copies of the 42-page report would be sent to every member of the Philadelphia legislative delegation and to members of the state House and Senate Education Committees.