If someone offered you venture capital to launch a new enterprise, avoid most bricks-and-mortar start-up costs (and get government grants to pay what’s left), compensate yourself well and hire young, enthusiastic non-unionized employees, could you pass up the opportunity? Before you answer, consider that you’d also be able to hone your leadership skills, rely on a guaranteed flow of public funding and full liability coverage, continue to augment this with private gifts, and expect customers to line up at your door.
This is the scenario that has lured the thousands of entrepreneurs who, seeking a more meaningful experience than Wall Street can offer, have started charter schools across the United States.
In business terms, it’s the quintessential American capitalist paradigm: Use government policy to help you grow, and lobby to change that policy if it’s too restrictive. Attract venture capital, market your service, build your customer base, keep your operating costs low and eliminate any local competition before those costs escalate. If you see expenses rising, move on to another opportunity.
This was not how all charter schools got started; if memory serves, many charter founders between 1992 and 1995 were smart, idealistic people who looked at America’s traditional public schools and simply said “we can do it better.” But in 1995, Federal support for charters began, allowing them to morph into big businesses—perhaps more convincingly than they became educational innovators. What is not yet clear is whether these edu-businesses can remain viable, provided they’re not operated irresponsibly, that is.
Some of the folks who start charter schools may do so without a plan for long-term financial sustainability. This could say something about their personal career horizons and their target dates for moving on. Early in a charter’s life-cycle, the school may break even only because it enjoys two start-up advantages: Its predominantly young and idealistic teachers keep payroll costs low, and big IRS-deductible charitable donations subsidize per-pupil taxpayer funding streams. But youth and big gifts can’t last forever.
Kim Gittleson of Gotham Schools, writing earlier this year about 2009 NYC charter school philanthropy, observed a slight drop in per-pupil giving from $1,443 in 2007-2008 to $1,320 in 2008-2009. This decline is likely to continue. At some point, all charters will have to get along on the same per-pupil funding as their traditional public school (TPS) cousins. Unless they can continue to keep costs down by attracting new cadres of idealistic, energetic—and inexpensive—young teachers, their financial advantage over TPSs will vanish. At that point, charters simply will have to outperform TPSs or die.
But that won’t matter to today’s charter parents. Like TPS parents, they simply want the best possible education for their children, and they’re betting that the tide of political and business support for charters, abetted by continuing erosion of support for traditional public schools, will give charters — and charter children — an advantage during the next few years. And when outside foundation support dwindles, many charter parents are prepared to contribute a couple of thousand dollars a year themselves to sustain their charter school, and perpetuate its public-private partnership. It’s cheaper than paying $30,000 a year for private school.
The question for policy-makers is very different. It’s whether the battle for resources and hearts and minds that is playing out between traditional public schools and charters will do so much damage to TPSs—and, often, to neighborhood cohesiveness—that it will seriously retard our nation’s overall educational progress and hurt our ability to compete on the global playing field.
This is the first part in a series of articles on the ups and downs and ins and outs of charter schools. Check back for the next installment.
CityPragmatist 
How nice to see a balanced piece about the sustainability of charter schools. I know parents will be ready to contribute should funding decline but, much like the free months of cable tv that were offered as a come on initially, we may be looking at tuition for charter schools. Then what happens to the public private cooperation?
Your use of the term “erosion” to describe the loss of support being suffered by traditional public schools makes it sound as if it has been an impersonal, natural process. Nothing could be further from the truth: public schools are being consciously, actively undermined and destroyed in an attempt to privatize education.
Jonathan Kozol has pointed out how the brokerage firm Jefferies and Co. called public education “The Big Enchilada,” a trillion dollar market that the private sector should try to muscle into. After mostly being the domain of Republicans, school privatization has recently been aggressively taken up by Democrats who’ve become captives of Wall Street and finance capital.
“At some point, all charters will have to get along on the same per-pupil funding as their traditional public school (TPS) cousins.”
This is currently not possible due to the structural inequity of charter school funding in New York State. A frequent critic of public charter schools, Patrick Sullivan, who represents the Manhattan Borough President, requested an analysis of charter school funding from the NYC Independent Budget Office determined that public charter schools receive less public funding than traditional public schools to the tune of a per-pupil gap of $300 to $3000, depending on whether they were lucky enough to receive public space.
It seems like educational apartheid to fund a public school at $3000 less than the City average, while asking them to educate students via an open enrollment process. All public schools deserve facilities funding, whether in the form of gratis public space, or funds to lease/build a new facility.
Until then, let’s not beat up public charter schools for trying to fill the $300-$3000 gap, which across a 500 student school, is anywhere between $150,000 to $1,500,000 annually.
I have mixed feelings about the influence of private/corporate money on public education, but let’s remember that Caroline Kennedy’s job for several years was to raise private money for the Department of Education, not charters. Broad, Gates, etc have funded traditional public schools as well and their influence is rarely mentioned in pieces about public charter school fundraising.
I feel that reliance on private philanthropy should be a stopgap until fair funding is established for all public school children, whether they attend public charter schools or traditional public schools. People of conscience should let Bloomberg and Albany know that charter school children should not be second class citizens.
I think the question really is, if charter schools were set up differently and charged tuition would anyone accuse them of capitalism?
Would you please do a piece about the loss of Traditional High Schools to small privatized schools that are NOT charter schools. The principal of the new small school contracts with a management group and then must raise funding for that group.
It is important that people realize that this is happening to our school system as Chancellor Klein closes schools such as Jamaica High School. The new small school being placed at JHS has a contract with ISA.
How does this work and who gains in this funding scheme? How different are these arrangements from Charter Schools?