Financial health of new Georgia charter schools falters

Charter schools in Georgia, the majority of which are in metro Atlanta, may be outscoring their public school peers on testing but many are not making the grade when it comes to financial health, according to a new Georgia State University study.

Andrew Young School of Policy Studies Professor Cynthia S. Searcy, co-author of the study, said that more than 40 percent of start-up charter schools in Georgia operated with deficits or in the red during the 2006-2007 school year, the latest dates the data was available at the time of the study. During the timeframe of the study, two charter schools closed, including one for financial difficulties.

“If we don’t know how these start-ups are faring financially, how can we detect financial stress early to help keep their doors open,” said Searcy. “Given the budget crisis all schools are facing, we need to have more conversations on how to help charter schools reduce costs or enhance revenues if we expect to use them as vehicles for educational innovation.”

Among the other findings: few opportunities exist for economies of size for these small, independent schools and size directly correlates to charter school financial health.

“Small enrollments can put schools at risk of closure because they have less per-pupil revenue to spread over their fixed costs,” Searcy said. “Since charter start-ups spend $1 of every $8 on management and administration costs, they might benefit from shared services with their local school district or other charter schools.”

Additionally, because there are no uniform practices of reporting financial information or specific deadlines, it closes the opportunity to develop any meaningful financial indicator system to detect financial stress early in a school’s operation, the study found.

Searcy, along with the study’s co-author William D. Duncombe, a professor at Syracuse University, studied audited financial statements from 25 Georgia start-up schools in the 2006-2007 school year. Since 1998, 34 start-up charter schools have opened and dozens of others have been authorized. Up to 2007, a total of five had closed.

Recent legislation authorized the creation of entire charter school districts and a total of 115 charter schools are or will be open this school year.

“Georgia is on the cusp of expanding the number of charter schools,” Searcy said. “Understanding their financial health is more important than ever.”

For a complete copy of the study, please go to http://aysps.gsu.edu/frc/3007.html.

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