Charter Schools in North Carolina
Another growing trend in the charter school landscape is the practice of charter schools entering into contracts with for-profit companies to manage their operations. These agreements enable organizations to transfer control of public funds into substantial profits.

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North Carolina, Raleigh - The educational landscape in North Carolina is undergoing a significant transformation, marked by a surge in charter schools growth.

Originating as a part of the school choice movement, charter schools were envisioned to give greater flexibility to teachers over education curriculums and experiment with innovative approaches within the public school system.

However, recent legislations have raised crucial questions about their accountability, funding and impact on traditional public education. 

In North Carolina, a new law passed in August, following a governor's veto override, transferred the authority for determining the opening and closing of charter schools. The responsibility shifted from the State Board of Education, appointed by the Democratic governor and confirmed by the General Assembly, to the Charter Schools Review Board, a body mostly appointed by the supermajority GOP legislature.

Another law approved the same day, aimed at expansion, allows counties to provide charter schools funds for their buildings and to raise taxes to fund those structures. It also permits some charter schools to receive more students, including out-of-state and foreign exchange students.

“Among other policies, the measure will remove enrollment caps for some public charter schools, a necessary move considering the 77,000 names on charter school waitlists last year”, said Lindalyn Kakadelis, executive director of the N.C. Coalition for Charter Schools, in a press release.

Moderate academic outcomes and one of the lowest per-pupil spending in the country 

While supporters say expanding charter schools in North Carolina offers more choices amid greater demand, critics say it is slurping money from traditional public education in a state with moderate academic outcomes and one of the lowest per-pupil spending in the country.

Bryan Proffitt, Vice President of the North Carolina Association of Educators (NCAE), stated that in districts like Durham Public Schools, where between 16 and 18 percent of students attend charter schools, there has been a decrease in funding for traditional public schools, impacting resources such as transportation, meals and energy expenses.

A Duke University report indicated that, according to estimates, the increase in charter school enrollment in Durham Public Schools reduced per-student funding in traditional public schools by $500 to $700 in 2018.

“Since 2011 they withdrew that cap and what we began to see was this massive expansion of the effort in a way that feels to us like it says more about an effort to dismantle and privatize schools than it does about actually meeting students' needs,” Proffitt said to Enlace Latino NC.

Charter schools receive state funding based on the average per-student funding provided by the local education agency in which the school is located. The North Carolina Department of Public Instruction makes allotments to both charter schools and school districts from a common public-school budget.

When a student transitions from a traditional public school to a charter school, the funding allocated for that student may move with them to the charter school. This can lead to a boost in funding for charter schools as they expand and draw in more students.

“If you lose too many students from your school districts into charter schools, then you have to start shutting down schools or reducing services”, said Graig Meyer, a Democratic senator who opposed the expansion of charter schools, to Enlace Latino NC. “Once you start losing money, how are you supposed to recruit students to come back? You start going downhill because the money is gone.” 

Over the last 5 years, the state funding for charter schools has consistently seen higher percentage increases compared to school districts. In 2018, charter school funding increased by 16 percent from the previous year, while school district funding only increased by 5 percent. This trend continued in subsequent years at a lower rate.

Funding figures for charter schools were obtained from the North Carolina Department of Public Instruction's (DPI) Highlights document. The funding dedicated to school districts comprises the summation of specific fund codes within the Office of State Management Office budget that indicate State Public School Fund allocations for each year, with the subtraction of the state funds allotted to charter schools.

In the 2022-2023 budget, state funding for charter schools increased by 8 percent, reaching a total of about 986 million. The school districts also saw an increase, albeit at a slower rate, with funding growing by 6 percent to reach a total of $12.3 billion.

Disparities in transportation and food services

Although the funding follows students who transfer to charter schools, these institutions are not obligated to cover transportation and food costs, unlike traditional public schools. 

Parents of charter school students often workaround transportation challenges by providing alternative modes, such as carpooling, when bus services are unavailable, said Rhonda Dillingham, executive director of the North Carolina Association for Public Charter Schools.

“They do have to get creative, but I would say it's more of a challenge for charter schools to provide transportation and much more expensive as well,” said Dillingham, co-founder of Uwharrie Charter Academy, to Enlace Latino NC

In 2021, slightly more than 50 percent of charter schools provided bus transportation. In contrast, every conventional public school provides bus transportation services.

The charter school statute states that they should develop a plan so that “transportation is not a barrier to any student who resides in the local school administrative unit in which the school is located.” But it might be a barrier for some students, said Democratic State Representative Julie von Haefen.

Charter schools educate about 8.9 percent of North Carolina's public school students. Their total enrollment has steadily increased from approximately 44,829 students in 2011 to 138,352 in 2022, surpassing the national average for all public school students enrolled in charter schools.

Over the course of two decades, Charter schools in North Carolina have become more diverse, yet disparities persist, including in the enrollment of Hispanic students.

In 2022, Charter schools had a slightly higher percentage of white students compared to traditional public schools, with 49 percent in charter schools versus 44 percent in traditional public schools, according to the annual report from the Department of Public Instruction (DPI) to the General Assembly. Charter schools had a slightly higher enrollment of Black students at 26 percent, compared to 25 percent in school districts.

Hispanic students make up 21.1 percent of the public-school population, whereas in charter schools, their presence is lower at 13.3 percent.

“It is really resulting in a lot of segregation,” von Haefen said to Enlace Latino NC. “A lot of the more affluent and privileged children that are able to go to private schools and don’t require transportation or food resources are getting into charter schools.”

Von Haefen tried to pass a bill (HB 920) last year that would have required charter schools to offer transportation and food services, among other things. However the legislation did not pass. 

Accountability concerns

In the first-ever national study of charter school's accountability, a resonating theme emerges: accountability lies at the heart of the charter schools and traditional public schools' debate. 

The charter school debate has evolved from its origins of the question of their very existence, now centering on the clash between advocates for enhanced public oversight and proponents championing a laissez-faire approach driven by market dynamics.

Charter schools are granted flexibility in shaping their curricula, academic calendars and personnel decisions. Also, while traditional public schools mandate teaching certificates for 75 percent of their educators, charter schools, by contrast, only necessitate certifications for half of their teaching staff.

But other than the formats, accountability concerns extend to the criteria for opening and closing of charter schools.

According to an updated report from the North Carolina DPI, last year, 39.4 percent of the 195 charter schools received a grade of D or F, compared to 42.3 percent of the 2,595 traditional public schools.

Ashley Baquero, director of the Charter Schools Office at DPI, stated that charter schools have a lower proportion of continuously low-performing schools compared to traditional public schools because underperforming charter schools are often closed.

The recent shift of responsibility from the State Board of Education to the Charter Schools Review Board, previously known as the Charter Schools Advisory Board, has raised heightened concerns among detractors about the approval and revocation of charter schools.

In March, the State Board rejected the application to establish Heritage Collegiate Leadership School in Wake County, citing concerns about the school leader Kashi Bazemore's management of a charter school with a history of low performance in Bertie County. In contrast, the Charter Schools Advisory Board had unanimously recommended approval of the application.

Earlier this year, the State Board also denied approval for the charter school American Leadership Academy-Monroe in Union County, despite the endorsement of the Charter Schools Advisory Board.

While these changes have raised concerns among some stakeholders, proponents of flexibility view them as a means to expedite the charter school expansion process within the state.

According to Dillingham, a charter school advocate, the change "streamlines the application process, allowing approved schools to establish themselves more quickly."

The Charter Schools Advisory Board is currently reviewing applications for fourteen new charter schools that would open for the 2025-26 school year. Among these applications are Heritage Collegiate Leadership School and American Leadership Academy-Monroe, both of which were revoked by the State Board.

In response to the recent legislative change, members of the State Board of Education in September approved a policy reaffirming their authority over charter school funding approval.

This move reflects a step back for those advocating for deregulation and increased freedom for charter schools.

State board members primarily expressed concern about the funding allocation to charter schools managed by Education Management Organizations (EMOs), which are for-profit entities that oversee schools.

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When taxpayer money for charter schools becomes for-profit 

Baker Mitchell, a prominent North Carolina entrepreneur, owns a network of “nonprofit charter schools” that channel millions of public education funds into companies under his for-profit ownership. These schools purchase or lease resources and services exclusively from Mitchell-owned businesses, raising concerns about transparency and competition, a ProPublica investigation revealed.

Another growing trend in the charter school landscape is the practice of charter schools entering into contracts with for-profit companies to manage their operations. These agreements enable organizations to transfer control of public funds into substantial profits.

Mitchell also owns Roger Bacon Academy, Inc., a for-profit charter school management company in North Carolina. 

In the state, there are twenty-nine for-profit managed charter schools. These include nine schools run by Charter Schools USA, sixteen by National Heritage Academy and four by Roger Bacon Academy, Inc

These EMOs contracts typically charge fees to schools that usually range from 10 to 20 percent.

But some EMOs, like National Heritage Academy, have been criticized for "sweep" contracts where the organization transfers or "sweeps" most of the public funding from a school, often ranging between 95 and 100 percent, to the charter management company.

It can be hard for regulators or schools to keep track of such setups when the money goes to the accounts of a private company.  

The U.S. Department of Education has identified the connections between charter schools and the companies that manage them, whether for-profit or nonprofit, as a “current and emerging risk” for the potential misappropriation of federal funds. 

Last year, The Learning Center, one of the longest-operating charter schools in North Carolina, voluntarily closed, after officials found financial irregularities that they’ve since reported to law enforcement. The school was one of the four charter schools to close last year in the state after alleged misuse of funds. 

Some proponents of charter schools also question the for-profit model. Dillingham said that their charter advocacy organization does not support any for-profit business that takes advantage of a school or the taxpayer's money for profit.

But she added: “Many of them turn to management companies to take some of those difficulties off of their plate so they can get down to the most important and that is engaging with the teachers, understanding students and making sure that the school is meeting its mission.” 

Charter schools were initially established in the mid-1990s in North Carolina advocating for greater flexibility and independence from what they viewed as restrictions in the traditional schools. 

Traditional public schools can also engage in contracts with for-profit agencies, but charter schools are exempt from various procedures typically in place to prevent corruption and the inappropriate use of funds, including the competitive bidding requirement when awarding contracts in many states like North Carolina.

N.C. disinvestment in education 

NCAE, North Carolina’s largest public school professional association, believes that the funds spent on charter schools should be directed toward public schools where there is a greater demand and necessity amid fewer education funds.

The issue of underfunding public education in North Carolina has persisted for over two decades, with the landmark Leandro court case recognizing the state's constitutional obligation to provide a "sound basic education." Subsequently, there have been adjacent cases and appeals regarding funding public education in the state.

Based on local gross domestic product (GDP), North Carolina had below-average education funding in 2020 — the lowest of any state. North Carolina disinvested in education despite having an above-average GDP.

States are ranked by funding effort, with the color of the horizontal bar indicating whether the state's effort was above or below the national average. For example, North Carolina’s PK-12 state and local revenue was 2.32% of the state's total GDP, or 1.28% below the national average of 3.60%. For context, the state's relative wealth (per capita GDP above/below the national average) is presented as an indicator of the state's fiscal capacity. Courtesy of the 2022 Making the Grade Report from the Education Law Center.

When adjusted for inflation, North Carolina reduced its funding by 10 percent between 2008 and 2020. State per pupil funding levels decreased from $12,078 in 2008 to $10,791 in 2020, when adjusted for 2020 dollars.

Budget negotiations

Personal income tax is the main source of revenue in the state. Recent proposals by the North Carolina Senate to further reduce personal income taxes, surpassing previous cuts in revenue, are expected to have an additional impact on the education budget.

House and Senate leaders have identified these tax cuts as the primary obstacle in their stalled budget negotiations.

Logan Harris, research manager with the North Carolina Budget and Tax Center, said that the tax cuts proposed by the North Carolina Senate would predominantly benefit the top 20 percent of the state's residents while further constraining educational funding.

Governor Cooper's office anticipates a yearly reduction in state revenue of approximately $13 billion by the fiscal year 2030-31, which accounts for roughly 19% of the state's existing general fund, according to State Budget Director Kristin Walker. This projection would lead to a yearly deficit of $2 billion for public schools and a $680 million annual deficit for higher education.

The state budget would significantly increase public funding towards Opportunity Scholarships, which are vouchers for private schools, making them accessible across all income levels.

"The continued diverting of our public funds into private schools and for the use of individual families, including those that have a lot of resources already, is one very specific educational policy in this budget that we think is a big problem when we think about wanting to have a strong public education system", Harris said in an interview with Enlace Latino NC.

Another provision in the state budget, related to the school choice movement, would restrict the power of the State Board of Education to withhold or reduce funding for charter schools approved by the Charter Review Board.


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Navigating the shifting landscape of education funding

Amid this panorama, the dynamic between traditional public schools and charter schools seems marked by a competition fueled by limited funding for public education in the state.

Moreover, critics contend that the recent legislation has intensified this tension by relaxing charter school requirements and accountability, further distinguishing them from traditional public schools.

“We have this wild west environment for charter schools in North Carolina,” Senator Meyer said. “That is very different from the states where they’re really the most successful charter school environments. There are lots of states where charter schools and public schools work together, where they see that there are ways that complement each other. We don't have that in North Carolina.” 

Dillingham agrees that there should be more collaboration between charter schools and districts across the state. For her, the laws that have been recently established are helping achieve that goal. 

“Maybe the piece of the new omnibus bill where counties are allowed to fund capital projects for charters, maybe that could be an opening,” she said. “I can envision charters and districts coming together and for example saying ‘Hey, you know, we have the same need for technology,’ and approaching their counties with a common need,” Dillingham added. 

Meyer believes that as long as Republican lawmakers continue to perceive the education system as promoting competition within a capitalist market and legislate accordingly, collaboration may prove challenging.

“Education should not be treated as a capitalist market, as capitalism assumes winners and losers. Who would want their child to be the loser in such a scenario?” he said. 

Claudia M. Rivera Cotto es una periodista bilingüe que cubre temas políticos, gubernamentales e inmigratorios en Carolina del Norte para Enlace Latino NC. Claudia forma parte de Report for America. Anteriormente,...

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