Calls for cyber charter reform intensify after audit found ballooning revenue, surpluses

Yahoo

04-03-2025

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HARRISBURG — Key Republicans say they are increasingly convinced they must reform Pennsylvania's quickly growing cyber charter schools after an audit identified ballooning revenue and surpluses and 'uncommon' spending.
For years, efforts to overhaul the way these schools are funded and overseen have foundered amid Harrisburg's complicated education politics. Republicans, in particular, have been torn between fiscal accountability and ensuring families have considerable alternatives to public schools.
But the audit, from Republican Auditor General Tim DeFoor, may have cut through some of the political noise. Echoing past reviews, DeFoor identified big surpluses and schools spending taxpayer dollars in questionable ways, including on gift cards, staff bonuses, and vehicle payments.
'The message to me was, we need to do something,' said state Sen. Lynda Schlegel Culver (R., Snyder), who took over this session as chair of the Senate's Education Committee.
Culver said she's aware that the last several chairs of her committee have also tried to work on this issue.
'They would get so close, and it just didn't happen — I had heard at one point, they were walking into the meeting, and it just fell apart as they were walking into the meeting,' Culver said. 'It's my hope with this report, which is very factual … that we have some consensus.'
DeFoor is the third auditor general to review cyber charter finances. In an interview with Spotlight PA, he said that while school funding and oversight can be highly political, 'Politics had nothing to do with taking this on.
'We're simply following up with what was done previously by other auditor generals, and also following up with how our schools are spending our tax dollars,' he said.
DeFoor's audit, the first since enrollment ballooned during the pandemic, looked at five of the commonwealth's 14 cyber charters.
He found the revenue that these charters take in nearly doubled from 2020 to 2023, from $473 million to $898 million. He also found that those schools' financial reserves increased by nearly 150% in that period.
As in previous audits, DeFoor also looked at the ways cyber charters were spending their considerable budgets.
Along with spending on things like gift cards and bonuses, there were also much bigger outlays. Commonwealth Charter Academy, the state's largest cyber charter operator, also spent $196 million to buy, renovate, or do both to 21 buildings over the period of the audit. In his news conference announcing his findings, DeFoor said the expenditure 'seems a bit out of the ordinary for a public school that is based in online instruction.'
All of this is legal under Pennsylvania's charter school law, DeFoor noted.
'These were taxpayer dollars,' DeFoor said. 'And cyber charter schools are able to do this legally because we have an old and outdated formula that really hasn't been changed since 2002.'
The law that dictates state funding for charters is the same for both brick-and-mortar and cyber schools. Public districts pay per-student tuition directly to charters, and that tuition is based on the district's per-student spending, with some deductions like facilities expenses.
If a student has a disability, their tuition is built on that base rate for the district, plus a standard percentage of its spending for all disability services — regardless of the kind of disability the student has.
In recent state House and Senate budget hearings on education policy, this state of affairs came up again and again.
Acting Education Secretary Carrie Rowe, who is newly in charge of the department, told lawmakers in the state House that 'to say that I was anything less than exceptionally concerned by the auditor general's report would be an understatement.'
In particular, she noted, she sees a real need to reduce the surpluses that cyber charters are allowed to carry, noting that 'when you juxtapose the 41% fund balances that … cyber schools have with the approximately 10% fund balances that [traditional] school districts have, it certainly is concerning.'
What has not been forthcoming, so far, is a consensus on a solution.
In his most recent budget proposal, Gov. Josh Shapiro, a Democrat, asked lawmakers to overhaul cyber charter funding by instituting a statewide, per-student base rate of $8,000 for all cyber charters, rather than the widely variable district-based spending that currently exists.
He also pitched that approach last year, and Republicans have so far been noncommittal on it.
The issue is complicated by several other, interconnected education policy debates. State lawmakers are currently operating under a court order to fix the funding system for traditional public schools, after a judge found the previous system unconstitutionally inequitable. That's creating a significant need for revenue.
As part of this debate, Republicans have pushed hard for programs aimed at creating more alternatives to public schools, including a taxpayer-funded voucher proposal that would send children to private and parochial schools. Culver noted that's still a priority for her caucus.
'Everything is interconnected to everything else,' she said.
A spokesperson for state Senate Republicans did not respond to a request for comment.
In his audit, DeFoor stopped short of calling for a particular fix for the cyber charter funding system, saying instead that Shapiro should convene a task force to review the current formula and recommend a new one that is 'equitable, reasonable and sustainable.'
Culver said she's open to a task force but noted that assembling one and then waiting for its reports will take months.
'I don't know that anybody wants to wait that long,' she said.
She added, 'My concern would be, do we already have enough data, enough studies on this issue? I'm still there, and we're still looking at it, but I think over the next, say, two or three months, you'll see a lot more movement on this issue.'
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