Deferrals, the hidden budget cut, hit state’s charter schools hardest


The inequity in per-pupil funding between traditional and public charter school students has been studied for years, but what could finally sound the death knell for many of the 809 charter schools that currently operate in California has so far been ignored: the state deferrals that are crippling the independent public schools that are the only choice for a quality education for thousands of families in low-income neighborhoods.

A recently released report published by Bellwether Education Partners, a reform-minded nonprofit consulting group, concludes that because California’s education system funds schools at 20 percent less than the national average, and funds charter schools at lower rates than non-charter public schools, Aspire Public Schools — serving  9,800 low-income K-12 students — is worse off educating California students than if it chose to operate in 18 other states with higher funding, less red tape, and fair access to school facilities.

Despite ranking as California’s highest performing public school system serving a majority of very poor students, Aspire operates with margins of only 0.6 percent, or $60 per student, making it harder to scrape together funds to open new schools despite California’s well-documented need for high-quality schools, the study concludes.

While the Bellwether report sheds much-needed light on the inequity in funding for public charter schools, the challenge facing charter schools is even deeper because of California’s budget, which has led to deferred payments to our schools. To make matters worse, Gov. Jerry Brown’s 2010-11 budget raises K-12 education deferrals from $7 billion to more than $9 billion — dollars that school districts and charter public schools will receive up to six months late. So not only are charters getting less per-pupil funding than the average California public school, they are being forced to sink what little revenues they do have into covering for the state delays.

This year, charter schools will have to borrow more than 40 percent of their annual state revenue up front at interest rates befitting corner check cashing stores. Since fiscal year 2002-03, the state reimbursement deferrals to public education have risen from less than 10 percent (for 30 days) to more than 40 percent (for as many as 180 days). This means that a school’s expenses to pay for the education of students in the spring are not reimbursed until late summer (of course assuming optimistically that the state budget is even adopted on time).

Schools are left to plan for a new academic year without having been reimbursed for the education they provided students the previous school year. The net impact of this deferral policy means that the 242 public charter schools serving more than 96,000 students in Los Angeles County must cope with a $227 million funding gap through the end of fiscal year 2010-11. If the state paid on time, using its own debt, those schools would put $18 million in cash flow management costs back into the classrooms.

This funding challenge has put our first-class academic, athletics, and arts programs at ICEF Public Schools — a network of 15 high-performing public charters in South Los Angeles serving predominantly African-American and Latino students — at risk. In a community where more than 50 percent of the students drop out of school, ICEF has sent 100 percent of the graduates from its five graduating classes to college — 90 percent of them to four-year colleges. More than 90 percent remain in college four years after graduating.

However, the state chooses to push the cash flow expenses down to the nonprofit organizations that are least able to find or afford credit. Charter schools happen to be hit the hardest, but state deferrals are also impacting small school districts and school districts that have a higher proportion of state funding than property tax funding. Deferrals are also forcing social service organizations of all kinds into hardship and potential closure. In a time of severe budget cuts, every penny should go to the classroom and not the bankers.

We must all consider the societal impacts of the decisions that are made to navigate the state’s cash-flow crisis. ICEF, along with many other high achieving charter schools throughout the state, is opening doors of opportunity for thousands of low-income and minority students. But California’s finances and the inequitable funding of charter schools are putting the independent public schools that serve 341,000 California students in a very precarious position.

If these programs are jeopardized, the loss to society would be profound. Policymakers need to level the funding playing field before our students no longer have the option of attending the public school of their choice and these budgetary decisions accelerate the demise of public education as a whole.

Caprice Young, entrepreneur and businesswoman, is the Chief Executive Officer of ICEF Public Schools, which educates more than 4,500 mostly low-income African American students in South Los Angeles. Before her tenure with ICEF, Young was the founding CEO of the California Charter Schools Association and former president of the Los Angeles Unified School Board.


  1. John   When charter schools start taking their fair share of Special Education students and especially high cost special education students then they should have more funding.  But now they leave such high cost students to regular public schools and claim they are underfunded.   That is not fair and Caprice of all people should know this full well.

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  2. According to the education blog SchoolFinance 101, California public schools are funded for addressing the needs of disadvantaged students at an adjusted rate lower than 47 other states.  Charters according to Caprice Young are worse off than 18 other states.  Isn’t the solution more funding for public schools, including charters?  This long term underfunding of California public schools is what in part has led to the perception that charters are needed to solve the educational needs of the disadvantaged. 

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  3. Charter school funding rates in 11/12 are $5,030/ ada for grade K; $5,106/ada for grades 1-3; $5,242/ada for grades 4-6 and $6,097/ada for grades 7-8. My public school (k-8) district receives $4,966/ada for grades K-8. If we were funded as a charter school, our unrestricted revenue would increase $3,303,607. I do not understand how this notion that charter receive less funding continues to be given life. In addition, charters are exempt from the agency shop laws enacted by the Democrats in the State Legislature, and at the time, the Governor’s office. The real numbers tell the tale.

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  4. Rob, a recent story in the LA Daily News about traditional schools converting to charter status for the financial windfall corroborates your data.
    “In the 2009-10 school year, for instance, charter high schools received an average of $7,369 per student, compared with $6,417 per student at traditional high schools.”
    There are many reasons why a traditional school would consider a charter conversion, but we can be certain that if there were a financial disadvantage, they wouldn’t undertake it.
    The post above, the story about El Camino – what they have in common is an illustration of why we need to change how public education is financed in California.

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  5. School finance is not my area of expertise, but I’d like to see Caprice Young respond to the information provided by Rob and Suz. John or Kathryn, perhaps you could report on this and give us more information?

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  6. John,

    Not sure if you read my post.  The topic was deferrals, not special ed; however, I will address that.

    At ICEF, we take all special Ed students who enter through the same lottery in which everyone participates, as required by law.  And, we have a lot of special ed student and would definitely educate more.  We are especially good at education young men who have been incorrectly identified as special ed for being bored and having so many revolving subs in the traditional inner city classroom that they were never taught to read.  Our dyslexic students go to college on scholarships.  Our ADHD students also excel. In addition, we have students studying using online technologies who achieve not that they are separated from classroom distractions.  We pay a huge portion of our federal and state special education funds back to LAUSD to cover the cost of education for students for severely and profoundly disabled students.  We would keep them ourselves if LAUSD would refund us back the money to pay for their education.

    Anyway, I miss you!  Come to South LA and visit our schools.  97% graduate, 100% go to college, 90% go to 4 year colleges, and 90% are still in college after 3 years.  We’d love to see your smiling face!


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  7. I agree.  More funding well spent would help a lot.  In the mean time, if the state could just pay us on time, ICEF alone would save $1.2 million a year in the cost of financing cash flow.


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  8. Districts are funded at very different rates depending on many factors.  First though, my point is on deferrals and how they hurt everyone (charters and traditionals).  Second, turn your schools into charters and get more money in your situation.  Third, make sure your school district gives you the buildings, otherwise you’ll have to pay for them out of your general funds.  Fourth, your teachers would still have the right to bargain collectively, but if you include them in decision making, pay them competitively and keep your  promises, they may not want to be in a union.  Sorry you’re hurting financially.  We are all feeling the pain.


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  9. Hi Caroline!

    If the federal government would allow charters to allow special ed students entrance to charter schools on a priority basis, I am certain we would take that bet and the funding that follows them.  In California, the charter schools have sprung up more often in neighborhoods where then can serve disadvantaged students.  The 15 schools I run are in South Los Angeles–  come visit!

    The problem of deferrals remains– and it affects all schools and many health and human service providers.  If the state would pay us on time– even if the state had to borrow to cover the cash flow– more money would go directly to students.  If they can’t at least pay on time, it would be great if they would pay us directly because now the path through the intermediaries can take 45 days and sometimes longer.  All that said, I need to mention that I am thankful to the bankers and investors for being willing to finance the cash flow timing crisis caused by the state.  It’s true that it increases our costs, but without that financing, kids in great schools would be back in places that populate prisons.


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  10. So you’re confirming the information that charter schools get more funding than public schools, Ms. Young, I gather:
    “…turn your schools into charters and get more money in your situation. ”
    That’s the opposite of what charter industry insiders and advocates usually tell us.

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