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Publication Date: Wednesday, November 21, 2001

State law would alter charter school funding State law would alter charter school funding (November 21, 2001)

**Effect could be 'devastating' for high school district, says superintendent.

David Boyce

Almanac Staff Writer

A new state law that changes the way charter high schools are funded could dramatically alter the financial landscape for the Sequoia Union High School District, which includes Woodside and Menlo-Atherton high schools.

The law could be "devastating and could cause a rethinking of the whole [charter school] movement, said Sequoia district Superintendent Jo Ann Smith before a meeting of the district Board of Trustees on Wednesday night, November 14.

Ms. Smith said the law could cost the district $8 million annually if all four charter schools located in the district had full enrollments.

Senate Bill 955, signed into law October 5 by Gov. Gray Davis, came in "under the radar," said a Sacramento attorney who is very knowledgeable about charter school legislation.

Many people were not aware of its implications, and others find it confusing. Another bill may be needed to clarify its language before it goes into effect, said the attorney, who requested anonymity.

The intent of the law, said a spokesman for the state Department of Finance, is to require districts such as Sequoia, which rely on local property taxes for the schools rather than a state payment per student, to pay $5,400 a student for every charter high school student in the district.

This is important to Sequoia because there are two charter high schools in operation, and two more in the works. All four schools are chartered by districts other than Sequoia and their funding comes directly from the state.

One of these schools is Aurora High School, located in Redwood City and sponsored by the Redwood City School District. The law "is bad news for [the Sequoia district] and bad news for us," said Aurora principal Alice Miller. Aurora's 80 students could lose $136,000 a year in supplemental funding from the Sequoia district. Ms. Smith said it's not likely the district would continue supplemental funding to charter high schools if it must also pay $5,400 for each charter high school student.
Charter school funding

Most California school districts receive their funding from the state at approximately $5,400 per student. Such districts are said to use a "revenue-limit" funding mechanism.

However, if a school district has very high property values, it can opt out of state funding and rely entirely on local property taxes to provide for its students. Districts that use this funding mechanism are called "basic aid." The Sequoia district is a basic-aid district and distributes about $7,100 per student from property tax revenues.

When a school district receives a petition to start a charter school, it can accept or reject the petition. If the district accepts, it must provide funds for the school using its own funding mechanism, whether basic aid or revenue-limit, to provide at least the state average for each charter school student, currently about $5,400.

If a district rejects a petition outright, it then must justify its rejection to county and state officials if the petitioners choose to fight.

One way of avoiding such confrontations in basic-aid districts has been for the district to signal to petitioners that it's not interested in a sponsorship, leaving the petitioners free to seek a sponsorship from a revenue-limit district elsewhere in the state.

This arrangement yields clear benefits to three of the four parties involved: The charter school receives funding from the state while residing in a basic-aid district.

The basic-aid district has fewer students to educate but enjoys the same level of property tax revenues.

The revenue-limit district earns a nominal fee for handling the record-keeping for the charter school.

In theory, the state benefits from the success of the charter school in providing an alternative education for its students, but the state also ends up paying for students who would otherwise be attending school in a basic-aid district. Basic-aid districts have, in effect, been receiving a bonus from the state for each student living in the district who transferred to a charter school that is sponsored by a revenue-limit district.

The new law closes the loophole that permitted such arrangements, according to state Department of Finance spokesman Sandy Harrison. Although he said the department did not initiate the bill, "we certainly supported it."

He said the department wants to ensure financial neutrality for the state, meaning that funding for students transferring to charter schools should follow the students from their home district.

Just last week, the San Carlos School District approved a new charter school that would serve students in the Sequoia district. Superintendent Smith said the San Carlos charter was approved with the understanding that the charter would eventually generate $2 million of new revenue from the state.

With state funding in place, the Sequoia district decided to contribute supplemental funding to some charter high school students to bring the per-pupil benefit up to what students in the district's comprehensive high schools receive.

Since it began operation in September 1999, Aurora High School has been receiving about $5,400 per student from the state and would receive about $1,700 per student this year in supplemental funding from the Sequoia district. Ms. Smith said that this supplemental funding would likely stop with enactment of SB955.

The situation is similar for East Palo Alto High School, the new charter high school located in the Willows neighborhood of Menlo Park and sponsored by the Ravenswood School District.

In this case, the district's formula for per-pupil supplemental funding is restricted to students judged to have special needs with respect to English language proficiency, standardized test scores or family income.
Local impact

Summit Prep, the new charter high school scheduled to begin operation in September 2002, possibly on the campus of Canada College in Woodside, initially sought a charter from the Sequoia district but received no encouragement, Summit representative Michelle Giurata said.

Summit eventually received a charter from the Summerville Union High School District, a revenue-limit district located 100 miles away in Tuolumne County. Prior to SB 955, Summit would have received state funding through its connection to the Summerville district and supplemental funding, if any, from the Sequoia district.

Ms. Giurata is not worried about the new law. "It has no impact on us," she said, adding that they would have received the same amount of money whether it came from the state or the district.

Superintendent Smith said the Sequoia district had decided during a summer study session to provide supplemental funding only to students with special needs. Supplemental funding is driven by demographics, Ms. Smith said. The Summit students are expected to come from Woodside, Portola Valley and Redwood City.

Ms. Smith said that all supplemental funding from the Sequoia district is now in jeopardy. Currently, she said there are about 160 students in charter schools in the district. By 2006, Ms. Smith said, that number could be as high as 1,600 students.

Under the current system, using current figures, the district might spend $1.4 million annually in voluntary supplemental funding for 1,600 charter school students. The new law would require the district to spend about $8.6 million.

Ms. Smith predicted dire consequences from the new law, including the possibility that Sequoia would eventually become a revenue-limit district. "This will have a very negative impact," she said. "All that we've built is threatened," she said, taking as examples the 20-to-1 student teacher ratio in math and English classes, special education programs and tutoring.

"I wish those who are planning to start a charter school would reconsider [their plans]," she said, "because they're going to create changes they never intended."

Sequoia Trustee Sally Stewart disagreed, saying that the new law may encourage charter schools and school districts to cooperate. "I don't necessarily look at it as a disaster," she said. "It could turn out the other way. I don't think it does us any good to look at this negatively."


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