Public Funding of School Choice
William Mathis, University of Colorado Boulder, December 2012
Various forms of school choice now exist across the United States: charter schools,
conventional vouchers, neovouchers, magnet schools, open enrollment, and across-district
choice. In addition, private schooling and home schooling have made claims for public
support through methods such as tax benefits and partial enrollments. The threshold
policy decision is whether public funds should be provided to choice schools, particularly
to schools run by private corporations or religious institutions. Issues such as democratic
governance, accountability of public funds, quality control and church/state concerns must
first be carefully deliberated. When lawmakers do decide to allocate public funding to
choice schools, as they have increasingly done over the past couple of decades, they must
then engage in a new level of scrutiny regarding the structure, level and conditions of these
While the threshold “yes/no” issue is indisputably important, this brief focuses on the
subsequent question: what criteria should policymakers consider in making decisions
about the nuts and bolts of choice school funding?
The most common way of thinking about school funding is per-pupil spending. On the
face, a “neutral” policy would simply allot the same amount of money per student to a
school of choice as it would to a conventional public school. But as professor Clive Belfield
has explained, the issue is far more complicated.
For example, student populations may vary. Schools that serve autistic children will have different cost requirements than a school with a high population of economically deprived children.
Further, while cyberschools require technology-related resources, they require only minimal resources for facilities, maintenance expenses and transportation. Should these schools receive the same
amount of money as a school that must pay these expenses?
There are no easy or valuefree answers to these issues. Funding sources also vary. Some states have high levels of state support and others do not.
Different states also pay charter schools, the most common form of choice, different
percentage amounts of the state’s base support level. Likewise, there are great variations in
local tax support, pensions and construction aid.
If the state stipend is low, then questions arise as to whether the difference should be paid by local districts, parents or
Some private schools have substantial endowments and grant support while others do not. Start-up funds are available for some schools but not for others.
Unless all revenue sources are considered, inequality of opportunities may arise.
When a school receives public support, either directly or through tax benefits, the issue of accountability—the “strings attached”—must also be considered. Private enterprises are
not generally required to have the same level of transparency as public undertakings.
However, as a general rule, the greater the amount of public assistance, the greater the
requirement for public accountability for the school’s operations and results.
Policies must also consider regional cost variations. The cost of living and the cost of
operating a school vary by location. A school in Manhattan, New York will have different
costs than one in Manhattan, Kansas.
The largest expenditure for traditional schools is for salary and benefits. These costs vary dramatically based on geography as well as faculty seniority, class ratios, salary schedule and the like.
Should tax-based funding be predicated on actual spending (cost-plus) or on a set amount
A set amount gives market-oriented operations an incentive to keep salaries low and class size high. A cost-plus system doesn’t discourage funding a high-quality education but it has no incentive to keep costs low or efficient. Again, there are no easy or absolute answers to these dilemmas.
There are also unique school factors such as age and condition of the facility, variations in
contracted services, rurality, and availability of community services. Compounding an
already complicated topic is the funding of private and public combinations. Should public
school cocurricular activities such as school-sponsored clubs and teams be available for
students enrolled in a cyber-school? Does the local school, the state or the cyber -school
pay the costs?
School funding formulas are therefore convoluted—and particularly so when choice is
added to the mix. The accumulation of discrete political decisions and compromises has
produced a crazy-quilt pattern of laws and rules both across and within states.
Thus, determining “fair” funding for various school choice approaches requires careful
examination and inquiry. While it is likely impossible and arguably unwise to eliminate these variations, clarity, fairness, equality and cogency require that policymakers make funding decisions applying principles of scientific analysis and problem solving.
Key Research Points and Advice for Policymakers
As a threshold matter, policymakers should deliberate about the advantages and disadvantages of providing public resources to financially support each type of schooling. Based on effectiveness, democratic governance, legal, financial and equality concerns, are public subsidies to a given choice option in the public interest? Only after a decision is made to provide such support do the following issues and questions come into play.
Each conventional public school and choice school receiving public funding should operate using a uniform chart of accounts, spending and revenue definitions. Finances should be subject to regular and public audit. Otherwise, informed decisions regarding funding, equity, and fairness are not possible.
Each type of school choice requires separate finance projections. Cyber schools, home schools, elementary, preschools, high schools, etc., all have natural cost profile differences.
Comparable costs should be established using comparable schools. If feasible, such
comparisons should be within the same neighborhoods and with comparable
Regional cost factors have been used in some states and may be indicated, particularly in states with large cost-of-living differences.
Facility, transportation, and administrative costs should be separately analyzed. Neighborhood public schools and choice schools vary considerably with regard to
Rules and laws should guard against malfeasance and should place appropriate
limits on profits and on the salaries of those running schools and management
Different funding structures for special education, English language learners, compensatory education and the like should be based on careful adequacy studies. Heretofore, funding weights have been primarily determined through an arbitrary political process, and they vary widely across states.
For students with relatively rare and unique high-cost disabilities, a costreimbursement approach may be indicated.
In terms of revenue, all sources—public and private—should be considered in calculations to determine a fair level of public funding.
20 When private donations or tuition costs are added to public funding, inequities can result.
The interactions of various policies should be considered. These may form a set of
unintended consequences, such as when a tax credit policy is added to a voucher.
All schools receiving public funding should be held accountable using the same system, including regular monitoring of fiscal issues and educational programs.
Notes and References
1 For examples of controversies surrounding these issues, see
Media Trackers (2011, May 17). School choice funding flaw is a flaw in logic (blog post). Madison, WI: Author.
Retrieved December 12, 2012, from
Foundation for Educational Choice (n.d.). Does school choice drain funding and resources away from public
schools? Frequently asked questions about school choice. Indianapolis, IN: Author. Retrieved December 12, 2012,
Council for Economic Education (n.d.). The controversial school voucher issue. EconEdLink. New York: Author.
Retrieved December 12, 2012, from http://www.econedlink.org/lessons/index.php?lid=185&type=student.
American Association of University Women (2011, February). Investing in our children: Public funds for public
education, not vouchers (policy statement). Washington, DC: Author. Retrieved December 12, 2012, from
Also, see the discussion in Welner, K. G. (2008). NeoVouchers: The emergence of tuition tax credits for private
schooling. New York: Rowman & Littlefield.
2 Belfield, C. (2008). Funding formulas, school choice and inherent incentives. Boulder, CO: National Education
Policy Center, 3. Retrieved November 1, 2012 from
3 Belfield, 2008, 1.
4 Batdorff ,M., Maloney, L. & May,J. (2010). Charter school funding: Inequity persists. Muncie, Ind.: Ball State
5 She, Y. & Berger, A.(2011). Charter School Finance. National Conference of State Legislatures. Retrieved
November, 20,2012 from http://www.ncsl.org/documents/educ/charterschoolfinance.pdf.
6 For example, contrast Florida, Connecticut and Ohio on finance issues:
Florida Department of Education (n.d.)/ Charter Schools FAQs (web page). Tallahassee, FL: Author. Retrieved
November 20,2012 from http://www.floridaschoolchoice.org/information/charter_schools/faqs.asp.
Merritt, G. E. (January 25, 2011). Change recommended in school choice funding. Hartford Courant. Retrieved
November 20,2012 fromttp://nepc.colorado.edu/publication/options 5 of 6
Local schools feel the pinch from loss of state funding (2012, November 9). The Vindicator (Youngstown, OH).
Retrieved November 21, 2012, from
7 She & Berger, 2011.
8 For further exploration of these issues, see, the U. S. Government and American Institute for Research’s site,
“National Charter School Resources,” at http://www.charterschoolcenter.org/.
9 Belfield, 2008, 18.
10 Mathis, W. J. (2005) The cost of implementing the federal No Child Left Behind Act: different assumptions,
different answers. Peabody Journal of Education, 80(2), 91-120.
Also see, for example,
EdSources (2010, September). How does California’s per-pupil expenditure compare with that of other states?
(web page). Oakland, CA: Author. Retrieved November 28, 2012, from
Also see Duncombe, W. & Goldhaber, D. (2003). Adjusting for geographic differences in the cost of educational
provision in Maryland. Baltimore: Maryland State Department of Education. Retrieved November 20, 2012, from
11 Belfield, 2008, 5.
12 Panepinto, P.( November 12, 2012). Easton Area School District to bill cyber and charter schools for students
who play sports. The Express-Times ( Easton, PA) / lehighvalleylive.com. Retrieved November 14, 2012, from
13 Mathis, 2005.
14 Belfield,2008, 1.
15 Belfield, 2008,.17.
16 Mathis, 2005.
17 Belfield.2008, 18.
18 Belfield, 2008, 18.
Arsen, D. & Ni, Y. (2012). Is administration leaner in charter schools? Resource allocation in charter and
traditional public schools. New York: National Center for the Study of Privatization in Education; Teachers
College, Columbia University. Retrieved, November 21, 2012 from
19 Mathis, W. J. (2008, April 11). Will we keep the promise? Trends in adequacy studies and funding
recommendations for poverty and English language learner students: 1999-2008. Presented at the annual
meeting of the American Education Finance Association, Denver, Colorado.ttp://nepc.colorado.edu/publication/options 6 of 6
20 Belfield, 2008, 18.
21 Belfield, 2008, 18.
U. S. needs more charter schools – with better rules. (2012, September 9). Bloomberg View. Retrieved November
20, 2012, from