Study Analysis: Charter School Funding Gap Contributes to Surging Inequity

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The most recent in a series of reports from the University of Arkansas, Charter School Funding: Inequity Surges in the Cities, paints a grim picture of inequality for charter schools in urban areas, where charter schools tend to serve the greatest number of students.

The report takes a close look at the different types of revenue streams and how they close or widen funding gaps. Looking at 18 cities, it found the following:

  • Following a recent surge in funding disparity between district and charter schools, the overall gap in these cities has reached $7,796 less per pupil if they attend a charter school—a 33% funding gap.
  • For the eight cities tracked since 2003, the funding gap has more than doubled.
  • Out of 18, six states receive a "C" or lower grade for overall funding equity.
  • At the local level, only Tennessee’s Shelby County, which includes Memphis, received an "A" for equity. Atlanta and Little Rock, Arkansas were identified as the least equitable.

State funding overall is the most equitable, and local funding is the least. Local funding disparities are not surprising given that many charter schools are their own school districts and have limited access to local tax dollars. These gaps have recently expanded and stand to only worsen as we enter into a recession and the likelihood of significant budget cuts.

Overview Charter School Funding Disparities by Funding Source

"Funding Source "	"Funding Gap per Student "	"Funding Gap for Charter Schools"	Least Equitable (City)	Most Equitable (City) Local	($7,491) 	68% less	Boston, MA 	Camden, NJ State	($428) 	5% less	Shelby County, TN 	Houston, TX Federal	($654) 	37% less	Washington, D.C.	Boston, MA; Phoenix, AZ Nonpublic	($1,412) 	46% less	Los Angeles, CA; Little Rock, AR 	Washington, D.C.

Dispelling Funding Myths: Demographics and Philanthropy

The report rebuts several arguments that are often used to dismiss funding disparities between charter schools and district-run public schools.

One such argument is charter schools serve fewer students that require additional services, such as students with disabilities, and therefore one should expect that they receive less funding. After taking a closer look at special education expenditures, however, the study found that differences in special education populations only explained the funding gap in two cities out of the 18 in the report—Boston, MA and Shelby County, TN. In 10 cities it accounted for less than a third of the difference.

The study also looked at the impact of demographics overall and found that the difference in low-income students enrolled in district schools and charter schools in this study was only 1% and thus would not explain funding differences. It's also worth noting charter schools serve more economically disadvantaged students nationwide (59%) than district schools (54%).

It also provides evidence that contradicts a common perception that charter schools have access to larger pools of non-public funds, such as private philanthropy. Previous research by the authors shows private philanthropy is concentrated on only one-third of all charter schools. This most recent study demonstrates that philanthropy and other non-public sources of funds, such as food service fees and private donations, are not “filling the gap.” In fact, in some places they are widening the gap: Los Angeles, for example, shows a dramatic increase in non-public funding for district schools ($2,035 per student) fully accounts for their growing local funding gap.

Charter Schools Lack Equitable Access to Funding Increases

These gaps are not a result of funding cuts. Instead, the study finds that, for these 18 cities, they are a result of inequitable access to funding gains experienced by district schools. As one example, Denver charter schools experienced a dramatic increase in local funding inequity from $8,911 in 2016 to $15,445 in 2018 because of recent increases in local revenues that were not shared equitably with charter schools.

It also raises significant questions about federal formulas intended to target Title I funds to high concentrations of poverty and whether charter schools are well served by them. The report doesn’t examine the role of LEA status and equitable allocations, but it would be interesting to see if there are lessons there for policymakers.

Are Charter Schools More Efficient?

While the report’s authors do not directly address this question, its findings raise important questions about educational efficiency. The report calculates that district schools in this study would have to trim $22 billion in revenue to equate charter school funding levels. Despite this, urban charter schools have been able to produce significant achievement gains, such as the gains found for students of color and English language learning students by CREDO, with significantly less funding.

Click to Tweet: "...district schools in this study would have to trim $22 billion in revenue to equate charter school funding levels.

Ensuring all public schools have access to equitable resources that lead to a high-quality education is much more complex than simply trying to balance inputs between district and charter schools. Nevertheless, this report provides policymakers with an important lens on the potential impact of funding decisions, as well as the need for greater transparency in the allocation of funds to schools.


The compounding impact of different funding streams that are not allocated fairly between all public schools has a significant impact. Not just on charter schools, but on the students attending them.

It is important for policymakers and state and local leaders to understand that state and local funding policies do not treat charter schools equitably. Moreover, unless federal funding accounts for this inequity—such as allocations related to the pandemic and Title I—the gaps could get worse and inequity can grow.