Charter School Funding: The (Updated) Facts

This time last year the Ministry of Education published a shamefully misleading publication, ironically called “State and Partnership Schools: The Facts”.

It is time to update the so-called “Facts” on charter school funding and show just how expensive these very small schools are still proving to be.

The Ministry brochure attempted to compare average per student funding between two actual State and two Partnership schools. But there were two tricks used in the illustrated calculation of average funding per student.

First, the funding for the charter schools was adjusted to remove two components produced by the funding model: “Property & Insurance” and “Centrally Funded Services”. The Ministry propaganda argued that these costs were paid for by the Ministry for State schools but that charter schools “must fund these costs themselves, from their Ministry payment.”

Second, the adjusted funding for the charter secondary school was then divided by a projected roll number of 300 rather than using the actual school roll.

For the charter secondary school, the combined effect was to show an illustrated average funding figure per student of $8,452. This was compared to an unnamed State decile 3 secondary school with an actual roll of 307 students and an average funding figure of $9,594.

Why is the illustration misleading?

The secondary charter school used in the brochure was Te Kura Hourua O Whangarei Terenga Paraoa, based in downtown Whangarei.

What we now know from examining their 2014 audited financial statements is that actual property costs in 2014 amounted to only $239,097. By deducting the “Property & Insurance” funding component of $737,936, the Ministry ignored the reality that actual property costs were nearly half a million dollars less than what the school was funded for.

For a State school, where land and buildings are provided by the Government, the cost of creating the school is met by the Crown, which owns the new school property as an asset. But no matter what the cost of creating each new school, the Board of Trustees and staff cannot change the way that teaching and learning are subsequently delivered in the new school. The facilities are provided “in kind” and not in cash. Once the school starts operation the normal State school funding based on the staffing entitlement and operations grant funding will flow.

However, charter schools are funded on a “cashed up” basis with the amount of each component determined by a funding model. Any overpayment from the funding model, relative to actual costs incurred, will create an additional source of income for the charter school Sponsor.

In this case, additional funding of nearly $500,000 per annum from this one source alone has been paid to the Sponsor – in cash. Under the charter school model, it is entirely up to the Sponsor as to what to do with the extra income.

If, for example, the Sponsor uses the cash to employ additional teachers, then the students will benefit from smaller class sizes, other things being equal. In the case of Paraoa, an amount of $500,000 per annum would allow an additional 6 or so teachers to be employed, over and above whatever staffing levels were funded for in the model.

For a school with only 75 students, ignoring an overpayment of this magnitude is grossly misleading when attempting to compare costs with State schools.

The second trick used by the Ministry was to divide the adjusted funding for the secondary school by the Maximum Roll rather than the actual school roll. The Ministry knows there is a real problem with the secondary school funding model, as these schools are paid a much higher Base Funding amount than the primary schools receive. So, to cover its tracks the Ministry used the Maximum Roll rather than the actual roll to bring the average down as much as possible.

But it did this only for the secondary school in the brochure. It did not do it for the primary school, which, incidentally, was the Rise Up Academy, based in Mangere. In the primary school calculation, it used a roll of 50 even though that school’s Maximum Roll is 100.

With the (very late) release of the 1 July 2015 roll returns, we can now see that Paraoa’s roll was still only 75 students, i.e. only one quarter of its Maximum Roll!

So, how should we analyse the school’s actual average funding position?

Here is our adjusted version of the Ministry’s “Facts” brochure:

$25,137 for the charter school in 2015 compared to $9,594 for the State school.

Confused? So you should be. And, just for good measure, the Government announced in August that the funding model would be amended for the two new charter schools to be created in the Third Round, due to open in 2017.

So, which version of the “Facts” would you like to use? The actual, the new model, the old model or the Ministry of Education’s fairy tale illustration?

http://www.education.govt.nz/assets/Documents/Ministry/Initiatives/Partnership-schools/StatePartnershipSchoolsFunding.pdf

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