Local public school leaders say Pa. cyber charter audit may spark funding reform

Yahoo

01-03-2025

JOHNSTOWN, Pa. – A report by Pennsylvania Auditor General Timothy DeFoor on five cyber charter schools' finances has created a stir among area school district leaders, who say the findings may finally result in funding reform for the alternative educational institutions.
'I don't think many people understand (the impact) until you start learning about it,' Westmont Hilltop School District Superintendent Thomas Mitchell said. 'It's harder to ignore the need for reform with these facts in front of you.'
Westmont Hilltop, which operates on a $26 million budget and has its own cyber option, spends $1.2 million annually in tuition to outside cyber schools, according to Mitchell.
With the release of the audit, Westmont Hilltop School Board President Robert Gleason said he thinks the findings will help move the needle on change.
'This happening will now allow the legislature to swing into action,' he said.
Gleason has been an advocate for cyber reform since his appointment as a school director in 2018, and he has served with the Pennsylvania School Board Association's Keystone Center for Charter Change.
PHOTO GALLERY | Westmont Hilltop Junior-Senior High School | Teachers in the Classroom
Gleason, the former chairman of the Pennsylvania Republican Party, said his firsthand experience with cyber schools' impact on in-person institutions made him want to get involved. He said he hopes reform is on the horizon.
'Raise concerns'
DeFoor, a Republican, released the audit report Feb. 20 on Commonwealth Charter Academy, Pennsylvania Leadership Charter School, Insight PA Cyber Charter School, Pennsylvania Cyber Charter School and Reach Cyber Charter School.
The audit investigated the finances of the five schools from July 1, 2020, to June 30, 2023.
DeFoor provided a series of recommendations for addressing potential cyber charter reform based on the findings.
'The overall results of this audit raise concerns over the funding formula for providing tuition payments to the cyber charter schools for regular and special education students with the excessive fund balances being accumulated by these cyber charter schools,' DeFoor said in the report.
He repeatedly stressed that nothing illegal was found during the review. But he said he's the third state auditor general to examine the situation and come to the same conclusion – that change is needed.
The audit revealed that the five schools raised tuition rates and received COVID-19 relief funds, resulting in near-doubling of revenues from 2020 to 2023. The institutions' funding increased from $473 million to $898 million in the three years, the audit states.
The five schools also saw enrollment increases from 27,450 in 2020 to 44,056 in 2023, increased expenditures from an average of $414.1 million to $888.1 million for that time, and reserves spiked by 144% from $254 million as of July 1, 2020, to $619 million by June 30, 2023.
Additionally, it was determined that each of the 500 school districts in Pennsylvania pays a different tuition rate, calculated by the district, for regular and special education students to the five schools. The range varied from $6,975 to $25,150 for regular education and $18,329 to $60,166 for special education, according to the report.
'When revenues and fund balances significantly increase, there is the potential for wasteful and/or discretionary spending of taxpayer dollars that could go beyond the legislative intent of the (Charter School Law),' DeFoor said in the report.
Although the schools alone determine use of these funds, the auditors found 'uncommon expenditures' during the review that raised concerns. An example of those unusual expenses, the report said, is Commonwealth Charter Academy's spending of $196 million during the audit period to purchase and/or renovate 21 buildings.
In another case, Reach Cyber Charter School provided $4.3 million in gift cards to students and their families from 2020 to 2023, as well as $32,000 in rent or utility assistance, the audit found.
Reach management justified the expenses with its Benevolent Giving Fund, which officials said is used for dispersing gift cards and coupons for a variety of reasons to 'needy families and other types of assistance,' the report said.
Responses to findings
Some cyber schools and groups responded to the audit with statements and evaluations on the findings.
Daniel C. Camp III, interim CEO of the Pennsylvania Coalition of Public Charter Schools, didn't disagree with the report.
'Auditor General Tim DeFoor has highlighted the need for charter school reform, a point that educators across the commonwealth of Pennsylvania agree on as long as it's fair and responsible,' he said.
'He rightly acknowledges the cyber charter schools he audited did nothing wrong and that their increased revenues were a result of parents fleeing traditional public schools, which were not meeting the needs of their children. Instead of focusing on money, let's focus what's the best education for each child in the commonwealth.'
Insight PA CEO Eileen Cannistraci said in a statement that the report 'confirmed what we already knew.'
'Insight PA is a good steward of taxpayer dollars,' she said. 'I commend the auditor general's team for conducting a thorough and professional performance audit and their collaborative approach to this process.'
Meanwhile, Westmont Hilltop's Mitchell said the findings give credibility to rumors that public school officials have heard for years about financial gifts and services provided to cyber charter families, such as the gift cards.
Greater Johnstown School District Superintendent Amy Arcurio said her district has seen a stream of students who return from outside cyber schools and tell about that type of monetary benefit. She said it is 'exasperating and unconscionable that hard-earned dollars – tax dollars that our families make' are being spent that way.
Arcurio stressed that she appreciates alternative educational platforms, stating if 'you learn from it and you are successful, that's wonderful.' Gleason said the same.
'However, we could totally help ourselves as underfunded school districts across the commonwealth with reform of the tuition that leaves our schools every year,' Arcurio said.
Greater Johnstown spends $5 million annually on outside cyber charter tuition, Arcurio said, adding that one serious issue for her is cyber students moving into the district and bringing their tuition bill with them, but never attending the city schools.
She said that reform for her, in addition to a funding change, is having families examine in-person district options and transitioning to Greater Johnstown's Cyber Academy if face-to-face education isn't working before going to an outside cyber charter.
Central Cambria School District Superintendent Jason Moore said 'every taxpayer and public school parent should be outraged' by the audit findings.
His district has been 'forced to reduce staff through attrition and raise local millage rates because of increased energy costs, in addition to the astronomical cyber charter school costs,' he said.
'Many school districts are delaying necessary repairs to roofs, windows, doors and mechanical systems – all while these cyber charters are building up massive reserve funds,' Moore said.
At Central Cambria, the annual tuition payment to cyber schools increased from $270,145 in 2018-19 to a high of $714,472 in 2022-23 and is now $695,000 in 2024-25, school documents show.
Recommendations
The audit report said the best way to address the issues is to have Gov. Josh Shapiro appoint a task force of professional and knowledgeable stakeholders with expertise in public school matters within six months of the audit's release to review Pennsylvania's funding formula for cyber charter schools.
That group would create a report determining an equitable and sustainable new formula based on actual cyber education costs that is fair to all parties within nine months of being established.
The task force chairperson should be empowered to work with Pennsylvania Department of Education staff to help research and review diverse approaches for cyber charter tuition rates for regular and special education, based on formulas from other states, the report said.
The report also said the General Assembly should pass a joint resolution within six months of the task force's report calling for the Legislative Budget and Finance Committee to issue a report within four months to study and facilitate legislation for a fair and equitable charter funding formula based on the aforementioned recommendations.
Cannistraci said she agreed with DeFoor in that any changes to the way public cyber charter schools are funded 'must be evaluated and reviewed in a comprehensive and collaborative fashion.'
'Insight PA would be willing to participate in a task force or legislative commission to look at cyber charter funding holistically and objectively,' she said. 'We strongly oppose the current call for an arbitrary flat tuition rate for cyber charter schools that is not based on real data or input from the cyber charter sector.'
Shapiro's next budget suggests a flat $8,000-per-student tuition rate for cyber charter schools.
Moore said reform of cyber schools is 'common sense' and he supports a task force. However, he said the issue has been studied enough and legislators need to step up and take action toward change.
'The Charter School Law that was passed in 1997 by the General Assembly never intended for this current situation to happen,' he said. 'It's a simple fix. One of the proposed solutions is to cap the rate at $8,000 and, in my opinion, that is a generous amount.'
Richland School District Superintendent Arnold Nadonley shared a similar message.
'There are so many flaws in this law,' he said, adding the current formula is 'outdated.'
Upon reviewing the audit, Nadonley said it was a reminder that legislators have not taken action on this issue yet, despite school district officials across the commonwealth calling for change for years.
Rachel Langa, Commonwealth Foundation senior education policy analyst, said in a statement that cyber charter schools 'exist in a delicate financial balance' and that if any funding formulas are reevaluated, 'then we must re-evaluate how the commonwealth funds all education options.'
'Pennsylvania families need a system that prioritizes achievement, choice and fiscal responsibility,' she said. 'Unless lawmakers come through with reforms that allow education funding to follow the student and hold all schools accountable to responsible spending, Pennsylvania students will continue to fall behind.'