The Michigan Charter Schools Report

Executive Summary

This report presents the results of a year-long evaluation of public school academies—commonly called “charter schools”—in nine counties in the greater southeastern Michigan area (Lapeer, Livingston, Genesee, Macomb, Oakland, Saginaw, St. Clair, Washtenaw, and Wayne) and referred to throughout this report as the “study area.” This summary presents our conclusions and recommendations.

The Michigan Legislature, in the fiscal year (FY) 1995–96 appropriation bill, required that two separate evaluations of the state’s charter schools be undertaken. Through a competitive process, Public Sector Consultants Inc. (PSC), and MAXIMUS, Inc., jointly won one of the evaluation contracts. (Appendix A presents information about the two companies. Appendix B lists the charter schools in PSC/MAXIMUS’s study area and presents certain pertinent information about them.) The other contract was awarded to Western Michigan University (WMU), which addressed identical research questions for charter schools in the western and central parts of the state.

The study period is school year (SY) 1997–98, although where possible we have updated the background data for the schools with 1998–99 information. Note that most financial data in the report are for SY 1996–97.

The first charter schools in Michigan opened their doors in 1994, following a number of legislative and judicial actions. At this writing, there are 138 charter schools in the state, but the number changes frequently, as new schools begin operations and some close their doors. PSC/MAXIMUS evaluated 55 schools in their assigned area, approximately half the charter schools in operation in the state during SY 1997–98.

Conclusions

• Michigan’s approximately 140 charter schools come in all shapes and sizes. Some are small (40–50 pupils), while a few are large (up to 1,200 pupils); some are brand new, while others have operated as private schools for more than 20 years; some rely on a “back-to-basics” curriculum, while others are trying new approaches; some are functioning smoothly as a organization, while others barely are surviving. This wide variety is a key characteristic of Michigan’s charter schools. It also means that arriving at specific conclusions about charter schools is difficult, since nearly every general statement has at least one exception.
• The demand for charter schools by parents has not abated. In SY 1998–99, the number of students attending Michigan charter schools is up 50 percent from the prior year. Sharp increases probably will continue during the next few years. Most schools we visited report having a long waiting list, and many school administrators report that one of their major concerns is finding enough space to accommodate rising enrollment.
• In the PSC/MAXIMUS study area, locating and renovating good building space is the most difficult hurdle for charter schools. Many opened in substandard buildings and had difficulty meeting fire safety requirements. While most charter schools have adequate operating revenue (supplied by the state), the state foundation grant usually is not adequate to enable a school to build a reserve sufficient to cope with major repairs, renovations, or expansion plans, particularly in the early years. Some schools we visited clearly are using substandard facilities. New federal grant money will help but is far short of satisfying need.
• Michigan’s charter schools have been unable to access the financing options available to traditional public schools. Only a small number of schools in our study have been able to finance building construction or renovation by pledging future state aid. Some school operators have resorted to financing their facility with personal assets.
• In many charter schools, administrators feel isolated from other charter schools and from the traditional education community. The support provided by intermediate school districts (ISDs) to charter schools varies widely across the region; some ISDs still resist including charter schools in the services they provide to other public schools. Although charter schools are intended to be “laboratories”for new techniques that can improve learning in all schools, the existing isolation means that there is very little sharing of information among charter and traditional public schools.
• In most cases, the presence of a charter school has had very little effect on the surrounding traditional school district. The most common response of the surrounding district has been to extend kindergarten to all day.⁽¹⁾
• Some charter school administrators, especially in the early years, are unprepared to run an organization of the size and complexity of a public school. The business side of the school, meeting a payroll and finding an adequate facility, overwhelms some—and in many cases, the school turns to an outside management company to perform these functions—but at most schools, this early turmoil abates after a year or two of operation.
• Early opponents of charter schools were concerned that the academies would attract or accept only the best and brightest public school pupils—the “cream of the crop.” Our conclusion is that this is occurring only rarely. In fact, based on the finding that many of the charter-school parents we surveyed for this study report that their children had been having difficulty in their former, traditional school, we conclude that if “creaming” takes place, it is that charters tend to attract some of the most involved and motivated parents. (Appendix C presents methodology and results of parent and teacher surveys.)
• On the whole, parent involvement is much higher at charter schools than at traditional schools. The act of removing their child from a traditional school and finding the right charter school tends to occur among parents who are engaged in their child’s education. Moreover, few charter schools provide transportation, so most parents are at the school twice a day, dropping off and picking up their child. Some schools go further and require a certain number of hours each month from a parent. As always, there are exceptions to this general observation: Some charter school administrators still lament the inability to get more parents actively involved in the school.
• The percentage of minorities in the study-area charter schools is higher than in both the state as a whole and the traditional public school districts in which the charter schools are located. In SY 1997–98 minorities comprised 68 percent of study-area charter school enrollment and 14 percent of the Michigan population; in SY 1995–96 minorities comprised 66 percent of study-area charter school enrollment and 54 percent of surrounding-district enrollment. (We do not have data for the same year for both the state and the surrounding districts.)
• For-profit management companies are playing an increasing role in the charter school movement. It is likely that in a few years the single, independent charter school will be an exception. The effect that multi-school (“chain”) management companies have on education should be the subject of future research. While management companies clearly address some of the business issues facing schools—e.g., cash flow management, facility financing, human resources management, regulatory compliance—they also may reduce classroom innovation by applying a standard setup for multiple schools. Recently, some individual charter school administrators have established their own management companies. This allows the school to opt out of the state teacher-retirement system and, in some cases, permits the school to borrow for start-up funds.
• Few charter schools have the facilities or funds to provide food service for their students. This is unfortunate because in most, the vast majority of the children are eligible for free or reduced-price lunch (e.g., their family income falls below a certain threshold based on family size). State law requires K–12 school districts to operate a lunch program, but most charter schools in the PSC/MAXIMUS study are exempt from this requirement because they do not serve all 13 grades.
• Michigan’s charter schools are more an experiment in organization than an innovation in curriculum or instruction. Experimental techniques are used in some of the schools we visited, but, in general, schools rely on common curriculum and pedagogical methods. “Niche” charter schools are the notable exception—schools that specialize, for example, in an ethnocentric curriculum or hard-to-teach kids. What does distinguish most charter schools from their traditional public counterparts is the former’s application of site-based management and also the relatively small setting in which it occurs. Site-based management is the fundamental difference between charter schools and traditional public schools.
• Compared to traditional public schools, charter schools in Michigan have both financial advantages and disadvantages. Charters do not have access to debt millage to fund the purchase and renovation of school buildings. Charters’ state aid is capped, which for many means that the level of aid they receive is below that received by the surrounding traditional public school district. Charters also must pay their authorizer up to 3 percent of all state revenue they receive. On the other hand, most charter schools do not provide student transportation, they concentrate on elementary grades (which generally are less expensive to operate), and they employ younger, less experienced teachers. Finally, charter schools are allowed to limit the number of pupils they serve, an advantage not available to traditional schools.
• There is a wide variation in the finances of charter schools, at least in the study area. Some are doing very well financially, with a large operating fund balance, while others are struggling with a small or negative balance. The most recent financial data suggest that the two most important factors determining a school’s financial condition are (1) the number of years the school has been operating and (2) whether it is independent or part of a multi-school management company. A small, but significant, number of charter schools had severe financial difficulties in the first year of operation, but most problems decreased over time. On average, second-year charter schools have an operating fund balance of about 6 percent of revenue, and third-year schools have a balance of about 13 percent. In SY 1996–97, charter schools run by a full-service management company had an average fund balance of 17 percent, compared with a fund balance of 5 percent for independent schools.
• There are serious questions about the reliability of the state Michigan Educational Assessment Program (MEAP) test as the primary measure of charter school student achievement. It is difficult to refute the argument of many study-area charter school administrators that at least initially, the MEAP results reflect the performance level of the students as they enter their schools. Moreover, the MEAP does not have “face” validity among many charter school administrators, who are concerned that the test may have racial or gender bias, uses only one mode of assessment, and largely is tangential to the objectives they have set for their school.
• Overall, the level of SY 1997–98 MEAP scores show charter schools below the average of neighboring traditional schools. On average, first-year charter schools score the lowest, while second- and third-year schools perform at a level closer to the average of traditional public schools. Although starting at a lower point, the improvement in MEAP scores among the charter schools is greater than among a comparison group of traditional schools. (Appendix D presents certain MEAP/HSPT testing and comparison results.)
• Attracting teachers generally has not been a problem for study area charter schools, but in many schools retaining teachers is an issue. Some teachers leave after a year or two because either they cannot adjust to their school’s teaching environment (which may be much different from that of a traditional school), or the school cannot financially reward experienced teachers at the same rate as traditional schools. In general, charter schools employ less experienced teachers at considerably lower average pay.
• There is lack of agreement on what the proper role should be for the authorizer (the entity—a state university, public school district, intermediate school district, or community college—under which a charter school operates) of a charter school. Several factors contribute to the problem. First, when the original schools opened in 1994, the procedures and methods employed by authorizers had to be created immediately, without prior experience; since then, improvement has occurred as authorizers learn and improve their process. Second, there is a potential conflict between the authorizer’s two roles (regulating/monitoring the charter school and assisting/guiding it). Finally, and most important, there seems to be a considerable difference in how the authorizers and the general public view the extent to which an authorizer is responsible for a charter school’s performance/conduct.
• The Michigan Department of Education (MDE) has had a limited role in assisting charter schools; for example, the state charter school office is staffed with only one professional and an assistant. Because of this limitation, the department’s role has been restricted to categorizing and filing documents, answering questions, and applying for federal charter school grants. Many charter schools struggle to complete mandated paperwork and as yet fail to fully know or understand the many requirements imposed on any public institution in Michigan (financial disclosure, open meetings, and so on).
• Charter schools are having considerable trouble with state and federal special-education requirements. Charter schools typically are so small that the cost of providing specialized instruction for one or two learning-disabled children is prohibitive. Equally important is that some charter school administrators and parents do not subscribe to the notion that public schools should be required to make special provisions beyond that required to accommodate physically disabled students.
• More time is needed to fully assess the effect of charter schools on public education. While the current study is a good first step, assessing the quality of education in charter schools will take a series of studies over many years.

Recommendations

• A multi-year project should be undertaken by the state to compare over time the education gains of charter school students to those in traditional schools. Whatever the specific research design, it should entail a longitudinal study of a group of students attending charter schools and another group attending a similar traditional public school. Other matters meriting further research include the role of management companies, effective oversight of charter school boards, school financial problems and solutions, and a case-by-case analysis of the reasons underlying charter schools failure.
• Intermediate school districts should be encouraged to assist charter schools, especially newly established schools. Since charter schools are small, they lack the resources to efficiently undertake many of the necessary functions of a public institution. The ISDs can do a better job of providing a way for charters to accomplish such tasks as handling payroll arrangements and meeting state filing requirements.
• The state, in cooperation with authorizers and the charter schools’ organization (Michigan Association of Public School Academies), should encourage the dissemination of information about successful initiatives taken by charter schools. We recommend that the state institute an annual Innovation Awards program whereby it would recognize (possibly with a financial award) charters that have established an unusually successful program. This both would honor accomplishment and serve a state-wide education purpose by bringing successful innovations to the attention of traditional public schools.
• The state may need to establish a program to assist charter schools with start-up funds. One option is for the state to establish a revolving loan fund for first-year loans to charters. Loans could be repaid over the next 5–7 years from the a school’s state foundation grant. Other states are taking such steps: Louisiana has a no-interest loan program for charter schools, Minnesota will award a start-up grant up of to $50,000 per school, Arizona allows charter schools to access capital facilities aid, and Pennsylvania and Ohio allocate start-up funds directly to the schools.
• The MDE needs to become more involved in helping charter schools, especially during their first and second years of operation. New charter schools need help in understanding and complying with the state’s reporting requirements, meeting special-education needs, and applying for federal funds.
• Both the state and the charter school authorizers need to do a better job of monitoring management companies. For example, detailed financial information from any public school is available to the public, but when a charter school contracts with a management company, financial accountability is reduced. It usually is impossible for an observer to determine how the money is spent and how high the management company’s return is. At the least, charter school management companies should be required to report detailed financial information annually to the state.^*Some traditional school districts—most notably, the Detroit public schools—recently have begun to authorize charter schools.

1- Some traditional school districts—most notably, the Detroit public schools—recently have begun to authorize charter schools.

A copy of the full report is available below.