Arizona charter schools spend more on administration, less in classrooms
In the rush to write charters into law in 1994, legislators omitted regulations that would have constrained unruly school spending.
Justin Price,
Anne Ryman,
Craig Harris and
Alden Woods, Arizona Republic
Published 12:24 p.m. MT Dec. 17, 2018 | Updated 10:44 a.m. MT Dec. 20, 2018
The Charter Gamble: In this series, we examine how Arizona committed 25 years ago to the then-untested concept of charter schools, and what the program has meant for the state. Today, Part 4, did the charter gamble pay off? Read Part 3.
When state Sen. Tom Patterson sat down about 25 years ago with a pen and paper to write legislation that would bring charter schools to Arizona, he wasn't sure exactly how to do it.
He didn't have many models to follow. But he did have two objectives for this new type of public school that would be unfettered by many of the regulations governing district schools: Charter schools had to improve achievement, and they had to provide more academic choices.
In 1995, State Sen. Tom Patterson poses in front of the Arizona Capitol in Phoenix
(Photo: Associated Press)
Today, Arizona's 544 charter schools are the choice of more than 200,000 students, or 17 percent of public school students. The state spends $1.2 billion a year funding them.
That 1994 legislation, and the changes in the years to follow, also have become noteworthy for what charter schools didn't have to do.
Arizona's charter school rules don't prevent conflicts of interest in school contracts. They don't impose rules about school boards being run by friends and relatives of school executives.
They don't put any limits on how much money charter schools spend outside the classroom. They don't require strict reporting of expenses.
Did the state's charter-school gamble pay off for students and taxpayers?
An Arizona Republic analysis finds:
About half of charter schools outperform their neighboring district school, when compared using the state's letter-grade system.
77 percent of charter high school students graduate within four years, well behind district high schools, which graduate 88 percent of their students in that time.
Nearly 90 percent of Arizona charter operators spend more of their state funding on administration than district schools do.
And more than 1 in 4 charter operators outsource those administrative responsibilities to private companies, shielding their finances from the public. These private companies are often owned by charter board members.
MORE: The rise of big charters in Arizona was fueled by powerful friends
Which performs better on academics?
Overall, whether Arizona students fare better in charter schools than district schools hasn't been settled.
Numerous factors — economic, demographic and financial — influence overall student performance at a school. To compensate for that, The Republic compared each charter school's School Letter Grade to that of its nearest district counterpart. Schools that are close together tend to draw from similar populations.
That analysis found:
Charters outperform their neighboring district schools most frequently at the primary-school level, grades K-8.
For charter high schools, only about half do better academically than their neighboring district schools.
And for "hybrid schools," those serving some combination of elementary and high-school grade levels, districts had the better school rating more often than the nearby charter school.
(Alternative schools are exempt from evaluation under the state's School Letter Grades program and were excluded from the analysis.)
In Arizona high schools run by charters, students graduate at rates lower than both the state and national average. Students who don't complete high school face higher rates of unemployment, according to the Bureau of Labor Statistics.
Arizona charter high schools had a 77 percent graduation rate, compared with 88 percent for district high schools.
Highest spending outside classroom: A strip-mall charter school
There are also marked differences in how charter and district schools spend money.
In 2018, nearly 90 percent of Arizona charter operators spent more on administrative costs than district schools did, according to The Republic analysis of the annual financial reports of every public school in the state. That amounts to 75 percent more spending on administration per student compared with district schools.
No charter school operation spent a larger share on administration in 2018 than Intelli-School, part of a chain of alternative high schools.
Intelli-School's four Valley campuses are housed in strip malls, where students guide themselves through an online curriculum. The central Phoenix campus, near 35th and Peoria avenues, shares a parking lot with Planet Fitness, a sports bar and a bridal store.
At least a quarter of Intelli-School's 370 students will drop out before completing their studies.
Intelli-School Charter High School in Chandler.
(Photo: Michael Chow/The Republic)
Virtual schools receive less state funding per student than brick-and-mortar schools. But because Intelli-School hosts students at strip mall campuses, it qualifies for full state funding even though the curriculum is entirely online.
The state paid the Intelli-School chain of four schools $3.2 million in fiscal year 2018.
District schools typically spend about 10 percent on administration and about 75 percent on instruction, according to The Republic's analysis.
Intelli-School spent more than half on administration in 2018 and just 23 percent on classroom instruction.
The Republic's analysis found students' scores on standardized tests tend to decline as schools spend more on administration and other expenses outside the classroom. Meanwhile, scores tend to rise as more money goes into Arizona classrooms.
MORE: History of Arizona charter schools: 'I don't think we realized what we'd done'
Charters' outside contracts shield spending
Overall, charters spend about 15 percent less per student on classroom instruction than district schools.
A handful of charters, like Intelli-School, have administrative expenses that surpass classroom spending.
"If you're going to spend a dollar on an admin ... you need to be able to justify it," said Joel Brice, owner of school finance consulting company Consilium. "The whole goal of this is to run the most effective educational program we can and get the best results for our community that we can."
Most of his clients hired Consilium once they were in financial trouble, Brice said. Most of those problems were the result of inexperienced governing boards allowing money to be spent inefficiently and unchecked.
It's impossible to scrutinize how Intelli-School spends the tax dollars it receives, including whether they're used in a way that best serves students. That's because, like 28 percent of Arizona charter schools, Intelli-School contracts with a private company for administrative services, shielding its finances from the public.
The private company, Resolutions Education Services Provider, is owned by three Intelli-School board members, Edward Walsh, Danielle Pollard and Gregory Sihler, according to Arizona Corporation Commission records.
Resolutions says on its website that it provides management of grants and accounting, hearing and vision screenings, management of special-education resources and substitute teachers.
Intelli-School Superintendent Mick McElhinney declined in a email to answer The Republic's questions about the chain's finances. Repeated calls to its board members and to Resolutions were not returned.
Arizona approved charter schools 24 years ago. Have they helped students academically? Arizona Republic
What is reported about finances is frequently inaccurate
What is reported about charter schools finances can include errors and inconsistencies, according to a Republic review.
Each year, charter operators and school districts file reports with the state to account for all revenues and expenses. The reports are intended to inform the public about their expenditures of tax dollars and, perhaps more important, state lawmakers as they determine budgets for the state's public schools.
But the information is never checked for accuracy. And The Republic found inaccurate information and inconsistencies are common.
For example, schools are required to report their average teacher salary on their website, but those figures are often at odds with the teacher salary information in their annual financial reports.
"If you have 10 different schools, you have about 10 different ways of calculating something."
Matt Benson, Legacy Traditional Charter Schools spokesman
Legacy Traditional Charter Schools was among those with conflicting figures. When contacted by The Republic, officials admitted they had double-counted the number of teachers in their annual report.
"If you have 10 different schools, you have about 10 different ways of calculating something," said Matt Benson, a Legacy spokesman.
Even after correcting the number, the average teacher salary in the report was still lower than what the school tells the public on its website.
Compass High School in Tucson reported on its website paying teachers an average salary of $50,584 in 2018. But based on its annual financial report, the average was $32,632.
"We may have screwed this up, I'm not saying that we didn't," said John Ferguson, the school's founder. "But we had the best intention when we did it."
Ferguson's son, Kerk, who now runs Compass, said the higher figure on the website was correct, and the annual financial report was in error.
Still, teacher salaries are only a fraction of the information the state requests and compiles in a statewide report. Because no one validates the information for accuracy, that report, as compiled by the Arizona superintendent of public instruction, reflects an incomplete and inaccurate accounting of charter schools' use of public funds.
Brice, the school finance consultant, sees a more accurate accounting of charter spending as essential to maintaining public support for the schools. He said he favors requiring a check for accuracy as part of charter schools' annual audits.
"The legitimacy of the movement is vital," Brice said.
Which system gets more funding? Well, it depends on how you count the dollars. William Flannigan, azcentral
Parents, the ultimate judge
Patterson, the sponsor of Arizona's original charter-school legislation in the early 1990s, said he views charter schools today as generally very parent-oriented, though not infallible.
The market competition among schools that his legislation helped unleash will address any problems that charter schools may create, he said.
"If charter schools went off the rails and a bunch of bad guys moved in and tried to take advantage of it, the parents would just say, 'Well, forget it. I'll put my kid in the district school,'" he said.
The issue, for him, has always been this: Are kids getting a better education because of charter schools?
"The answer to that is 'yes.' If they weren't, parents wouldn't send them to charter schools. They don't have to send their children to charter schools."
NEXT IN THE SERIES: Will profiteering, a lack of transparency spur changes to Arizona charter school law?
What do you think about charter schools? Do you want Gov. Doug Ducey, the state Legislature or Attorney General Mark Brnovich to make changes to Arizona's charter school system? Sound off at:
Gov. Doug Ducey: 602-542-4331 or azgovernor.gov
House Speaker-elect Rusty Bowers, R-Mesa: 602-926-3128.
Senate President-elect Karen Fann, R-Prescott: 602-926-5874
Find your legislator:azleg.gov
Attorney General Mark Brnovich: 602-542-5025 or azag.gov
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What does it take to open a charter school in Arizona?
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Arizona charter schools spend more on administration, less in classrooms In the rush to write charters into law in 1994, legislators omitted regulations that would have constrained unruly school spending. Check out this story on azcentral.com: https://www.azcentral.com/story/news/local/arizona-education/2018/12/17/arizona-charter-schools-spend-more-district-school-admininstration/2015982002/