Pa. Auditor General finds cyber charter school revenues ‘excessive,’ calls for tuition reform

Key Takeaways:

• Auditor General Tim DeFoor’s audit found five cyber charter schools hold a combined $619 million in reserves.
• The outdated Charter School Law’s funding formula does not reflect actual instructional costs.
• Calls for tuition reform include a proposed $8,000 flat rate per cyber charter student.
• Cyber charters used excess funds for staff bonuses, gift cards, and purchasing buildings.
• DeFoor recommends forming a task force to develop a more equitable funding formula.

Audit Reveals Excessive Reserves in Cyber Charter Schools

Pennsylvania Auditor General Tim DeFoor announced the findings of an audit revealing that five of the state’s largest cyber charter schools have collectively amassed $619 million in taxpayer funds as of June 2023. The schools—Commonwealth Charter Academy, Pennsylvania Leadership Charter School, Insight PA, PA Cyber, and Reach Cyber Charter School—more than doubled their reserves since 2020.

“The problem is the funding formula,” DeFoor stated. “Until the funding formula is fixed, this problem is going to continue to happen.”

Outdated Funding Formula Under Scrutiny

DeFoor attributed the ballooning reserves to Pennsylvania’s decades-old Charter School Law, which he says fails to use actual instructional costs to determine tuition rates for cyber charter schools. Unlike brick-and-mortar schools, cyber charters have lower operational costs but can charge similar tuition rates.

Lawmakers from both parties have criticized the current provisions, noting that they allow cyber charters to accumulate funds beyond their operational needs. DeFoor emphasized that reserves are intended “to cover unanticipated bills so there’s no interruption in a child’s education,” not to sit unused in bank accounts.

Calls for Tuition Reform

Governor Josh Shapiro’s recent budget proposal includes implementing a flat rate of $8,000 per cyber charter student, a move estimated to save school districts $378 million annually. While Democrats and public school advocates pushed for this cap in the last budget, the change did not survive negotiations with Senate Republicans.

DeFoor, a Republican himself, argued that adjusting the tuition rate is about rectifying the funding formula, not infringing on school choice. “It’s an outdated formula that’s creating excessive reserves,” he said.

Questionable Spending Raises Concerns

The audit highlighted how some cyber charter schools utilized their excess funds. Reach Cyber Charter School, whose fund balance tripled over four years, spent more than $7 million in staff bonuses and provided over $4 million in gift cards to students and families. Auditors urged the school to consider whether these expenditures represented “the best use of taxpayer and public education dollars.”

Reach Cyber responded by accusing the auditors of pursuing “an agenda of anti-cyber charter school policies.”

Commonwealth Charter Academy (CCA) was also scrutinized for using $196 million to purchase or renovate 21 buildings. DeFoor described this as “out of the ordinary” for an online-based public school. CCA defended the expenditures, stating that the buildings serve as Family Service Centers, which are “crucial for developing and maintaining a statewide school community.”

Surge in Enrollment Amplifies Funding Issues

All five audited schools experienced significant enrollment increases, growing from approximately 27,000 students in the 2019–2020 school year to over 44,000 in 2022–2023. This surge has intensified the financial impact on school districts. Allegheny County school districts alone spent over $86.5 million on cyber charter school tuition in the same year.

Tuition rates vary widely by district, ranging from $7,000 to $25,000 per student, and up to $60,000 for those receiving special education services.

Recommendations for Reform

To address these concerns, DeFoor recommended that the governor establish a task force within the next six months. This group, comprising education officials, cyber charter representatives, school districts, and other stakeholders, would have nine months to develop a more equitable funding formula. DeFoor urged lawmakers to enact the plan within six months of its completion.

“It’s a tight time frame, but we really can’t delay any longer. It’s already been 23 years,” he stressed. “Our recommendation is a nonpartisan, systematic approach to make sure that there are sufficient funds available for cyber charter schools to operate while at the same time protecting our taxpayer dollars.”

The Path Forward

The audit and subsequent recommendations revive the ongoing debate over cyber charter school funding in Pennsylvania. With bipartisan acknowledgment of the funding formula’s flaws, the focus now shifts to whether lawmakers can come together to implement reforms that balance the needs of cyber charter schools with fiscal responsibility and transparency.