New York Charter Facilities Funding Report

new york charTer facIlITIeS fundIng rePorT eXecuTIVe SuMMary In New York, a state nearly 20 years into the charter school movement, a major hurdle still exists that stifles the new school pipeline: school buildings. The problem is two-fold. It is a huge challenge to find suitable building space. And it is also a significant challenge to pay for one.

A great many charters schools do not receive any dedicated public funding to help pay for the schoolhouse building. A groundbreaking law passed in 2014 sends assistance to some schools in New York City. But the policy design prevents many New York City charter children from receiving this funding – and no charters located elsewhere in the state receive continuous and reliable public facilities support.

Below we examine the status of charter school facility financing statewide, and explain how upstate schools are struggling desperately to deal with their very real challenges.

In a place as large as the Empire State, it can be extremely difficult for the needs of those living outside of New York City to feel that their voices are heard by lawmakers, and sadly when it comes to facilities support for charters, these schools have been left out in the cold.

Buffalo and Rochester, both Great Lakes cities famous for snow, also have a high charter school market share. In both cities, educational options are desperately needed. Sincere attention by policymakers for a solution to the charter school facility challenge is long overdue.

necharters.org

203-691-7232

info@necharters.org

@necharters

/necharters

90 State Street, Suite 1030, Albany, NY 12207

Background Charter schools are free public schools of choice, and like all public schools, they need appropriate schoolhouse buildings. Having four walls and a roof are key needs. When we picture schools in action, images of children clustered on brightly covered carpets, with shelves of books in the background and windows allowing light to shine in immediately come to mind.

Yet for many charters, getting to this point can be so challenging that success is nothing short of a miracle. Affording a suitable building is the largest infrastructure challenge for many charter schools, here in New York and across the nation. It is a well-documented problem that can prevent promising schools from ever opening. For charters that do open, Buffalo charter school student too often huge sums of money must be directed away from instruction and into maintenance, rent, or mortgage. Founding teams must jump through incredible hoops to secure a building and find a way to pay for it.

It is commonly accepted that buildings matter in education. Studies have repeatedly shown that a building with infrastructure problems has a significant negative impact on student outcomes. For example, researchers at the University of Washington showed that “a plethora of scientific evidence suggests that student learning and achievement is deeply affected by the environment in which the learning occurs. Improving student learning, achievement, and motivation requires attending to both the structural and symbolic features of the classroom.” 1 Other studies have shown the importance of adequate, appropriate school facilities not only for student achievement, but for student and staff health and well-being.2 Acknowledging brick and mortar needs goes beyond both scientific study and common sense though. In New York’s famous Campaign for Fiscal Equity ruling, judges from our highest court had this to say about the State’s constitutional obligation: “[c]hildren are entitled to minimally adequate physical facilities and classrooms which provide enough light, space, heat, and air to permit children to learn. Children should have access to minimally adequate instrumentalities of learning…”3 The stewards of large city school districts across the State have recognized the importance of the schoolhouse, joining with civic leaders to implement massive facility renovation and construction projects. Typically, the state carries the bulk of the burden in financing these types of facilities overhauls.

In Buffalo, despite the city school district having reached its legal debt limit, officials at the State, City and District levels created a unique funding plan to finance a district-wide, $1.5 billion reconstruction project.4 A similarly financed project, expected to cost $1.3 billion over four phases, was started in Rochester in order to “bring the learning environment into the 21st century and provide students with facilities that are comparable to neighboring suburban districts.” 5 Syracuse has also begun a massive, district-wide reconstruction project, also largely funded by state resources, after city and school officials “noted that many elementary and secondary schools in the City were in poor physical condition and recognized that this deterioration was becoming a serious impediment to learning and teaching.”6 Yet, despite this widespread recognition that school facilities impact student health, well-being and academic achievement, New York State does not do nearly enough to support charter school facilities. It is a problem that has plagued the charter movement since the original law was passed in 1998.

In a nutshell, charters’ per pupil funding does not account for the cost of a facility.

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In 2014, an unprecedented law was passed, granting certain charters in New York City the guarantee of free space in a district building, or the cost of rent up to 20 percent of the per pupil funding. A later amendment increased the amount to 30 percent. This policy is groundbreaking - but excludes all the charters outside of New York City. Within the City, the policy has created a multi-tiered system where some schools get facilities aid for all students, others get partial funding by receiving aid for only some students, and others get zero aid. This is because the funding is only available to schools that were newly established or expanding in grades from the year the law was passed. It has left out schools that have been high-performing for years, some of the oldest schools in the state - schools that, because of their student success rates, have been renewed by their authorizers several times.

In short, many successful charter schools were the subject of age discrimination.

In places like Rochester and Buffalo, cities desperate for alternatives to the struggling district schools, all charters must overcome a basic, necessary operational hurdle with no dedicated money other than occasional grants. It is time to expand the facilities aid policy to all charter schools, regardless of location.

The needs of Buffalo, Rochester, and other regions outside of New York City must be addressed.

The Challenge of SECURING a Facility Charters face tremendous hurdles when locating and securing appropriate school facilities. From the start, the building options that can be used as a schoolhouse, particularly in urban areas, are extremely limited.7 Simply put, most buildings aren’t configured to hold a school.

Many available spaces do not include classroom space, administrative and support services spaces, and common areas such as a cafeteria, gymnasium, auditorium and library.8 The types of buildings that do have these amenities already in place are typically limited to former school buildings, owned by area school districts or by private (often parochial) Rochester charter school students advocating schools. Yet if these buildings are vacant, it is often due to their poor for fair funding condition,9 thus necessitating significant renovation costs – costs which the charter school itself would have to cover. Other times the owner of the building is resistant to leasing or selling the space to a charter school, especially at an affordable price. Districts across the state have been hesitant to lease unused space to charter schools,10 as have regional Catholic Dioceses that own vacant former parochial schools, such as the Diocese in Buffalo.11 Cities and other municipalities that own unused school facilities12 can be similarly resistant to lease or sell facilities to charter schools, particularly when other development opportunities are presented.13 Often in Buffalo, Rochester, Syracuse and other ‘rebounding’ upstate cities, the most in-demand vacant school facilities14 are scooped up by private developers who have the resources to pay cash to secure the buildings.15 Charter schools, especially new schools, lack this immediately available funding. Vacant buildings that are available to charter schools typically need significant up-front investments simply to get them to occupancy.16 As a result, charter schools are often forced to create partnerships with third parties in order to secure space. One silver lining in this - it has led to some incredibly inventive renovation!

For new charter schools, the process of securing space is further complicated by the school’s growth expectations. Typically, a charter school will open serving two or three grade spans, with a plan to slowly accommodate a larger grade span and/or larger grade sizes.17 This forces schools to either find and pay for more space than they need to accommodate future growth, or find an arrangement that allows them 3

to add space as they need it. Additionally, a new charter school has a limited window of time to secure space before they open. Often charters receive their final authorization in the fall of the school year prior to their anticipated opening date, giving schools seven to eight months to enact their plans to secure, prepare, and occupy an adequate school building.18 On top of identifying the physical space, charter schools face significant impediments in financing the lease, purchase and/or renovation of a facility. Charter schools lack a credit history, any sort of collateral to secure a loan, and have no guarantee of revenue,19 thus effectively prohibiting them from seeking a conventional loan from a commercial lender, and certainly one at reasonable interest rates or repayment terms. A charter school does not receive initial revenue from sources other than grants until July of their opening school year, and the law prohibits charter schools from pledging anticipated per-pupil funding as collateral for a loan or extension of credit.20 Charters often must turn to alternative, and much more expensive, funding options or leasing arrangements.

These factors all perpetuate a critical problem in the continued strengthening of the charter school sector. A newly approved charter has no funding, no ability to secure financing, and a limited window to secure and occupy a facility. They also face an extreme supply shortage, with entities who hold the few unused school buildings resistant to leasing or selling to charter schools. The facilities that are available to charters typically require serious renovation and construction to meet the needs of a school, and sometimes are held by private developers that impose restrictive, expensive leases. As a result, charters often rely on the assistance of non-profits, foundations or private real estate developers to assist in securing and renovating of facilities.21 Some charters have successfully gone to the bond market, but this takes ample time and significant expertise, and is not possible in all cases.

When you look at new schools in their first few years of operations, the total amount that goes to facilities costs is staggering. For these twelve schools, 21.54% of their operating expenses went to facility costs, compared to all non DOE-located charter schools which spent about 5 % less. The increased facilities burden takes money away from the classroom, teachers, counselors, and tools for learning.

caSe STudy: kIng cenTer charTer School King Center Charter School (KCCS) opened in the fall of 2000; it was one of the first charter schools in Buffalo.

King Center academic leaders partnered with community leaders from the King Urban Life Center (KULC), a non-profit organization which started in the 1980s out of a community effort to save a local church, Saint Mary of Sorrows. King Center was approved to open serving 80 students in grades K-3; the school was housed in the original Saint Mary of Sorrows church building through a lease agreement with KULC. The initial charter permitted King Center to serve grades K-4, with a maximum enrollment of 100. In 2001, King Center added a 4th grade class, reaching its full grade range and maximum enrollment. This enrollment also brought the school to the facility’s capacity. Under the lease agreement, KULC as the landlord was responsible for capital investments.

King Center eventually sought to expand and serve more children. In 2009, the school was able to expand in its original location at KULC, adding grades five and six. In 2012, again up for renewal and seeking another enrollment expansion, the school’s limited facility became a significant roadblock. Unable to meet this capacity in the existing facility, King Center’s renewal application included a plan to finance an expansion of the school.

In 2013, after the school received another five-year renewal, the initial plan to expand their existing school facility proved unworkable.

Stepping back, the school realized that for the amount they were paying in rent, plus the anticipated expansions costs, it simply wouldn’t be prudent to expand at their current location. At the same time, former Buffalo Public School #71, only two miles away from the existing school, was available for purchase. Needing a moderate amount of renovation, KCCS would be able to purchase and renovate the school to better meet their needs.

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Here's where the school hit significant roadblocks and conflict with their landlord. While the school proceeded to explore the opportunity to move to PS #71,KULC accused King Center of ‘abandoning the neighborhood’ and petitioned the Buffalo Common Council to refuse the sale. King Center responded that the KULC site neither had adequate space, nor adequate amenities, such as a gymnasium, auditorium, and cafeteria, to meet the expanding schools needs. PS #71 offered both sufficient space and the desired amenities, and at a cost significantly below the projected $7M expansion required at the KULC site. The City eventually approved the sale to King in June 2014, with the school fully renovated and moved in to by the school for the start of the 2014-15 school year.

eMPTy SPaceS and neIghBorhoodS The facility conundrum facing charters is especially troubling and frustrating in Buffalo, Rochester, and other upstate New York cities with a stock of empty former school buildings. In many of these cities, not only are the educational systems failing the vast majority of students where achievement rates are abysmally low, but also, because populations in these cities have declined significantly over recent decades, the facility infrastructure of the urban districts vastly exceeds the needs of the Vacant Buffalo School Building district. Cities across upstate New York have an excess of space that not only could be utilized by charter schools, but would also take significant maintenance and upkeep costs off of these financially strained districts. As discussed above, older district school buildings can be good options for new charters, but they do carry heavy renovation price tags and lots of local political maneuvering.

Vacant and unused facilities tend to be concentrated in the neediest neighborhoods, the exact type of area new charter schools would like to locate in order to serve at-risk children. School buildings have regularly been shown to be key anchors for neighborhoods22 and charter schools particularly can be valuable cornerstones of neighborhood revival and revitalization efforts across the country.23 Yet in too many upstate cities, unused school buildings sit vacant or are sold off to property developers for only private use, depriving these neighborhoods of key anchoring assets. Charter schools provide an important opportunity to retain and restore anchor spaces for neighborhoods in need of communitycentered sites.

There have been some efforts on this front, however they are too few, far between, and inconsistent.

In March 2016, Rochester Mayor Lovely Warren proposed and sold two unused school buildings to charter schools in need of larger or additional space, partnering this proposal with a related plan that allowed the schools to remain tax-free.24 The sale price for these facilities, however, was $1.5 million each, a significant sum considering each facility required an estimated $400,000 in renovations.25 While the Mayor’s efforts to prioritize charter schools in reusing school facilities is admirable, charter schools, especially newly started schools, simply are not given the financial ability to regularly secure adequate space. It is time to establish Vacant Buffalo School Building policy that allows charter schools throughout the state to use vacant or under-used district buildings for free.

At the state level, legislation has been proposed in the New York Senate that would give charter schools (excluding those in New York City) a right of first refusal over vacant public school buildings listed for 5

caSe STudy: elMwood VIllage charTer School Elmwood Village Charter School (EVCS) opened in Buffalo for the 2006-2007 school year to serve grades K-4 and a total of 125 students.

The charter plan would see the school expand to serve grades K-6, serving one 25-student class section per grade level with a maximum enrollment of 175 by 2010.

Immediately the school began searching for an adequate facility, but was faced with a limited number of options. After a significant search, the school was able to secure a lease for a building on Elmwood Avenue, owned by a development company. In order to secure the facility, the school needed to agree to a 20-year lease with the developer at a lease cost of around $215,000 per year.i After the building underwent significant renovations in order to meet the needs of a school, EVCS moved in in August 2006, serving 125 students in grades K-4.

The initial EVCS charter called for growth to serve grades K-6, up to a maximum enrollment of 175 by 2010. In 2010, the school submitted a renewal application that requested expansion to cover grades K-8, as well as adding a second section at each grade level, bringing maximum enrollment to 350 by 2015. This application was approved in 2010.ii In order to expand to serve this number of students, it was clear that EVCS would require new or additional space, as with current enrollment the current site, at 124 Elmwood Avenue, was reaching capacity. For 2011-12, the year EVCS added seventh grade, the school reached an agreement with the nearby First Presbyterian Church at 1 Symphony Circle to use vacant school space to host the school’s middle grades.

In 2009, facing the prospect of a split campus to accommodate its enrollment, EVCS began exploring new locations to accommodate its current enrollment, as well as meet its expected enrollment requirements. In 2009, Public School #36, located at 40 Days Park, closed.

EVCS began exploring the possibility of purchasing the vacant building from the City of Buffalo.

Here’s where it got tricky for EVCS. Competing with the school was at least one developer who aimed to purchase the building, renovate it, and list it for lease for a charter school to occupy.iii EVCS formally submitted a bid of $540,000, while the development company bid $800,000.iv Yet with the support of the school’s neighborhood association, EVCS’ bid was approved by the city’s Common Council. The developer brought a legal challenge to the bid’s acceptance, arguing that the city ignored the fair market value of the property in accepting an unsatisfactory bid, with a judge finding in the developer’s favor and throwing out the school’s bid.v In response to community pressure from the neighborhood association, the Mayor and Common Council remained committed to finding a way for EVCS to purchase the property, choosing to sell the property ‘by appraisal,’ allowing the City to consider factors other than price in accepting a bid. Further complicating the entire ordeal was the fact that EVCS was a current tenant of the developer in question, who owned and managed their existing site at 124 Elmwood Avenue.

After two years of public and legal wrangling, EVCS’ bid of $540,000 was officially accepted and closed in November 2011.vi The building required significant rehabilitation. EVCS was able to purchase the building with cash reserves, then obtained $6 million in commercial financing for reconstruction.

Despite relocating to 40 Days Park, EVCS is still bound by its original lease at 124 Elmwood Avenue. Since 2012 it has subleased the space for the full amount of rent plus utilities. As of 2016, the school still has ten years remaining on the original lease.

In April 2016, EVCS was approved to open a second school. vii This second location would replicate the current EVCS model, starting small: the school opened with K-2 and eventually expand to serve K-8. In early 2017, after a long search process, including vacant school sites, space for lease and noneducational facilities, a former Catholic school site was secured for the second school location. The facility had long been vacant and previously used as a storage facility: the school has planned a multi-year renovation project to restore many of the common space areas, but in the meantime is making due with using only some parts of the building.

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sale by their respective host cities.26 Under the proposed legislation, prior to a school facility being sold, leased, or otherwise dispossessed, charter school entities in the host city would have a right of first refusal to purchase the building at no cost or a nominal fee. The school would have a one year period to occupy and begin use of the building or else it would return to the city; the charter school would also be prohibited from selling or otherwise transferring the facility without the consent and agreement of the city.27 These efforts should be applauded and continually pursued. And more must be done that would benefit both charter schools as well as the host districts and cities. One statute already in effect that largely goes ignored requires school districts to make available to charters, upon request, a list of vacant and unused facilities or portions of facilities, including private school buildings within the district’s boundaries, that could be suitable for the charter school.28 This clause is meant to assist charter schools in identifying suitable facilities, but it also is meant to assist school districts in making use or disposing of unused or under-used spaces. It is in the best interest of charter schools, the district, and the neighborhoods to do whatever possible to keep school buildings operating as schools, but doing so will require cooperation between the stakeholders.

The Cost of Maintaining a Facility In 2015-16, New York State charter school expenditures on facility related expenses totaled $209.4 million,29 including expenditures for rent, repairs/maintenance, utilities, depreciation & amortization, occupancy, real estate taxes, facility management fees, and facility loan interest expenses.30 On average, New York charter schools spent 13.1% of their entire operating budget on facility related expenses.31 The range is from under 1.0%, for some schools that receive facility space at no expense in New York City, to a high of 34.6%, with some schools spending an inordinately high percentage of their operating revenue on their building.

Rent and occupancy32 are, unsurprisingly, the largest facility-related expenses, at $58.3 million (27.9% of total facility-related expenses) and $48.4 million (23.1%), respectively. However, charter school expenditures in other facility-related areas are also noteworthy, particularly in repair and maintenance costs, which amount to $21.3 million, or 10.1% of all facility-related expenses, and utilities, which amount to $12.8 million, or 6.1% of such expenses.

The above figures take into account all charters statewide, including those that either receive space from or co-locate within a New York City Department of Education (NYCDOE) facility. While these schools have lower facility-related costs, their facility expenses are not zero since they often support maintenance, repairs, utilities, and other secondary expenses.

Removing schools who only occupy NYCDOE facilities, remaining charter schools spent $156.9 million on facility related expenses in 2015-16; for these schools, the share of total operating expenditures dedicated to facility-related expenses increases to 16.68%, a significant part of an already underfunded budget.

We propose lawmakers pass two policy changes: right of first refusal and extend facilities aid to all charter school children. Extending the facility funding provision to all schools, wherein schools would receive additional funding in the lesser amount of their actual facility-related expenses or 30% of their total operating budget, would cost New York $171-308 million.33 These figures might initially appear large, but consider that the statewide building aid program, which supports districts, is a $3-billion-dollar program every year.34 New York isn't shy about spending on education needs, just about spending on charter children. In fact, let's take a look at how this spending works for charters.

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why ProVIde charTerS wITh facIlITIeS fundIng? IT'S an InVeSTMenT In BeTTer oPTIonS 2016 graduaTIon raTeS 87% 62% 44%

85%

Rochester

48%

78%

Upstate

60%

71%

Statewide

68%

0%

20%

Charters

40%

Host Districts

60%

80%

100%

Host District w/o Criterion Schools

2016 PerforMance, gradeS 3-8 100% 80% MaTh

60%

ela 48.2%

40%

32.4%

32.9% 25.4%

20%

45.0%

31.8% 25.3%

19.3%

17.2%

20.3%

17.8%

7.9%

0%

Buffalo

rocheSTer

Charters

35.3%

30.8%

29.5%

7.6%

uPSTaTe

STaTewIde

Buffalo

rocheSTer

uPSTaTe

STaTewIde

Host Districts

enrollMenT oVer TIMe 150000

*

120000

90000

60000

30000

uPSTaTe

rocheSTer

2015-16

2013-14 2014-15

2012-13

2011-12

2010-11

2009-10

2007-08 2008-09

2005-06 2006-07

2015-16

2016-17 2017-18*

2013-14 2014-15

2012-13

2011-12

2010-11

2009-10

2007-08 2008-09

2005-06 2006-07

2016-17 2017-18*

2015-16

2013-14 2014-15

2012-13

2011-12

2010-11

2009-10

2007-08 2008-09

2005-06 2006-07

2015-16

2016-17 2017-18*

2013-14 2014-15

2012-13

2011-12

2010-11

2009-10

2007-08 2008-09

STaTewIde

2016-17 2017-18*

*

* 2005-06 2006-07

0

*

Buffalo * Estimate from chartered enrollment

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A Closer Look at How Charter Schools Are Funded The Charter Schools Act of 1998 permitted charter schools to begin operations in New York State. Charter schools receive operating funding on a ‘per-pupil’ basis directly from each individual student’s home district of residence. The method of calculating this funding amount has changed over the years, largely to the detriment of charter schools.

Under the original formula, the charter per-pupil rate was directly linked to local district per-pupil spending, albeit in a way that minimized the per-pupil amount. District per-pupil spending was calculated by dividing Rochester Academy Charter School student the district’s “operating expenses” by the number of “aidable pupils.”

Two parts of this formula, however, reduced the per-pupil rate below the district's actual per-pupil expenditures - first, by excluding building expenses and other costs from the numerator; second, by increasing the pupil count through weighting special education and secondary students and by including charter students in the count itself.35 As a result, the charter per-pupil amount was calculated as significantly lower than the district’s actual per-pupil spending.

Following the State’s budget crisis beginning in 2008, charter tuition rates were frozen from 2010-11 through the 2013-14 school year.36 While district spending was also briefly impacted, it recovered far more quickly: over the same period, average per pupil spending in large city districts37 increased by 5.0%; statewide per-pupil spending increased even more, by 9.3%. Between 2009-10 and 2013-14, the gap in the large city per-pupil spending average and the large city charter school tuition rate average grew 14.4%, from a shortfall of $6,819 to $7,803.38 While spending in districts across the state was increasing, charter schools were being left behind because of the funding freeze.

The next three years saw a charter school funding method that kept the freeze in some districts, and allowed modest increases (not driven by the traditional formula) in others, through a "supplemental basic tuition" established in legislation.39 Yet even still, the gap between charter and district spending continued to grow; large city and statewide per-pupil expenditure amounts increased 1.1% and 4.0% respectively, compared to 1.0% for charter school rates.40 Overall, since the funding freeze first went into effect, per-pupil expenditures have grown 13.7% statewide and 6.1% in large cities, compared to a 1.0% increase in the average charter school per pupil amounts. One other funding stream of note was a modest but important per pupil amount provided to all charters statewide in the spring of 2016 and 2017; it was an additional per pupil allocation from the Senate. Similar funding to be dispersed in 2018 will go only to New York City charter schools.

In 2017, the legislature finally returned charter schools to an amended funding formula.41 While this new formula gives charters some degree of predictability in funding rates, the positives end there. Under the new formula, increases in charter funding rates are tied to changes in the district’s operating expenses.

This link between the growth rate comes only after a 10-year period where district spending rapidly outgrew charter revenue. As a result of the new formula, this gap is permanently locked in place and is expected to grow wider.

A Partial, But Wholly Inadequate, Solution In 2014, as part of the annual budget deal, the New York State Legislature passed a law to address the issue of charter school facilities. It was groundbreaking because it guarantees charters that were new or 9

growing from that point forward would receive a free co-location – shared space in a building with another city school - or extra facilities funding.

A companion proposal that would have provided access to the state’s building aid funding to all other charter schools was left out of the final negotiated legislation.

Here’s how it works. Under the law, charter schools in New York City are statutorily permitted to request co-location from the host district which must then either offer the school co-location in a public school building at no cost, or offer the school space in a privately or publicly owned facility at the expense of the host district, and at no cost to the charter school.42 If the district fails to offer, or the charter school is unsatisfied South Buffalo Charter School student illustrating by the district’s offer, then the charter school may appeal;43 if the charter what her school could do with fair funding school wins the appeal, then “the city school district shall pay the charter school an amount attributable to…the lesser of…” the actual rent cost of a privately-owned alternative, or 20% of the charter school’s basic charter school tuition revenue.44 In 2017, the law was amended to raise the maximum additional facility aid to 30% of tuition revenue.45 Unfortunately, since the law applied to only newly-opened or expanding charter schools, and only in New York City, the legislation did not go nearly far enough. Many charter schools in New York City, along with every charter school outside of the City, were left out in the cold. Ironically, within New York City itself some of the most successful and oldest schools were the ones left out.

The 2014 charter school facilities bill was a clear political compromise. The Governor and Legislature recognized the importance of dedicated facility funding for charter schools, and fixed an immediate crisis for some charter schools that were faced with a Mayor – Mayor Bill de Blasio - bent on preventing their growth and a high-profile crisis with children facing “educational homelessness.” This is a clear case of political expediency and the budget negotiation process leading to a partial solution which left out many schools. The 2017 amendment only makes the disparity worse.

All charter supporters recognize the importance of the 2014 law, which created a model method for facilities financing that incentivizes the use of existing infrastructure, and set precedence for increasing funding to benefit the state charter sector.46 But the law fundamentally bifurcated both the state charter sector and the New York City charter sector.47 It is time to remedy this divide.

In the 2016-17 school year, nearly 20 percent of all NYC charters received absolutely no facilities aid and were not given access to public space. Other schools in private space might get some facilities aid for a few grades of students but no aid for others – overall, nearly one-third of the entire charter school population in the city did not receive aid. As you can see, the policy results in arbitrarily different treatment of charter schools and charter school children when it comes to providing access to what has been well established as a basic necessity for schools. The latest estimate shows over 31,000 NYC charter students did not receive facilities aid, with an additional almost 25,000 pupils in charter schools outside of the city that are similarly ignored.

Solutions and Recommendations There are a number of solutions that could, and should be explored by New York State to remedy this issue.

The ideal solution is to provide dedicated per-pupil funding directly from the state to charter schools. A number of states across the country already take this approach, including Massachusetts, Minnesota, 10

and New Mexico.48 The District of Columbia similarly provides a dedicated “Facilities Allowance” to charter schools that covers lease payments or may be used to build a fund balance specifically to secure facilities financing at a later date.49 Florida distributes capital outlay dollars to all public school districts through a central fund and includes charter schools that meet certain requirements in this distribution.

In New York, the easiest such solution builds off of the current facilities funding legislation. The state should extend that law to all charter schools statewide. Under this solution, upon request from a charter school, a host district would be required to either offer unused space within an existing district facility, or secure private or other non-district public Rochester charter school parent advocating for school space at no cost to the charter school. Failing this, the district fair funding at Eugenio Maria de Hostos would alternatively be responsible for additional funding to the charter Charter School school equal to the lesser of the actual facility-related expenses, or 30% of the charter school’s per-pupil revenue. From a legislative perspective, this would be a relatively easy technical change, just requiring an extension of an already existing law that, for the most part, has been successful.50 This solution encourages charter schools and host districts to cooperate to make the most use of unused or under-used school facilities. In October 2016, the National Association of Public Charter Schools released an update to its ‘model charter legislation’ and included the New York City facility program as a model for other states.51 New York would be wise to extend the program statewide.

Another alternative, which has been supported in the past by the New York State Senate, is to give charter schools access to the State Education Department’s building aid fund. For the 2016-17 fiscal year, this fund dedicated to reimbursing schools and school districts for capital-related expenditures, including building new facilities, purchasing facilities, renovating existing facilities and, in certain circumstances, leasing facilities, is funded to the amount of $3 billion.52 Under Education Law §3602(6), school districts are eligible for direct funding from the State to cover certain capital expenses.

Relatedly, though less comprehensive, are funding options used in other states that assist charter schools in securing necessary funding or financing, such as direct lending with more favorable terms than charter schools can secure through traditional commercial lenders,53 credit support or enhancement programs,54 and access to tax-exempt bond market financing.55 Turning to non-financial solutions, New York should consider policies that would give charter schools direct access, or at the very least the right of first refusal, to vacant or under-used publicly owned school facilities. Such policies are widely used in other states,56 and generally are seen as in the best interest of not only the charter school, but also the district, by removing maintenance and repair costs for unused facilities, as well as the community, since vacant school sites are restored to active community anchors.

Conclusion Students thrive and do their best when they are learning in adequate and well-equipped educational facilities. In fact, the schoolhouse is proven vital to an overall quality education for children.

Despite their many years of success, charter schools are still the only public schools in New York forced to take money from their already smaller operating budgets and use it to pay for and maintain their buildings. This only hurts children. Educational dollars meant for classrooms goes to paying for rents, mortgages, and all the costs associated with building maintenance.

In Buffalo and Rochester, the denial of state facilities funds leaves charter school children in those 11

cities with much less educational funding; they receive 60 and 68 cents on the dollar respectively when compared to children in traditional district schools. And these are two cities facing a public education crisis. Often charters are the only good option for parents looking for a good school for their child.

The denial of state facilities funding hurts in other ways. Charters, especially start-up charters, face a number of significant hurdles to securing adequate spaces, including blocked access to available facilities and a lack of funding and financing options – this means some schools with great vision will simply never open their doors because securing the capital and funding for a building is an insurmountable challenge.

New York lawmakers talk all the time about investing in what is working. If they truly want to do that, they should invest in charter schools and their facilities. Enact legislation that would make it easier for great schools to open and stay open. Many of these schools are providing an education that is second to none in the cities where they are open. We should not stifle them or future schools just waiting to open their doors. This problem has a solution and it is up to law and policy makers to enact it. Our students are not worth less – and they deserve fairness.

End Notes 1.

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Cheryan, Sapna, et al., “Designing Classrooms to Maximize Student Achievement,” Policy Insights from the Behavioral and Brain Sciences, Vol. 1, No. 1 (Oct. 2014).

Lumpkin, Ronald, “School Facility Condition and Academic Outcomes,” International Journal of Facility Management, Vol. 4, No. 3 (October 2013) (“…school facility condition contributes to students’ academic achievement. Adequate school buildings help assure that the health and well-being of teachers, staff, administrators and students are maintained.”). See also “Research on the Impact of School Facilities on Students and Teachers: A Summary of Studies Published Since 2000,” 21st Century School Fund (Sept. 2010).

CFE v. New York, 86. N.Y.2d 307, 317 (1995).

See ‘Building Upon the Past,’ Building WNY Newsletter (2011) (available at http://www.markcerrone.com/ articles/2011%20Building%20Western%20New%20 York-%20Building%20Upon%20the%20Past%20Article.pdf). Under the funding arrangement, which required new State legislation, the District would be eligible for reimbursement for 93.7% of the construction costs, while the developer retained for the project would be responsible for assisting the District and the City develop strategies to cover the remaining 6.3% of costs.

See ‘Program Background,’ Rochester City School District (available at http://www.rcsdk12.org/page/713) Like the Buffalo project, the vast majority of expenses would be borne by the State.

See “Background,” Syracuse JSCB (available at http://www.jscbsyracuse.us/sites/default/files/ 1-4-Background.pdf).

Murphy, Justin, “Lack of buildings sends Rochester charter schools to Greece,” Rochester Democratic & Chronicle (March 28, 2016) See Cunningham, Josh, “Charter School Facilities,” National Conference of State Legislatures (December 2011) (available at http://www.ncsl.org/documents/ educ/CharterSchoolFacilities.pdf).

See, e.g., Jameison, Bob “Wanted: Home for Elmira charter school,” Star Gazette (November 3, 2014) (Elmira charter school rules out two vacant school buildings because renovation costs would be prohibitive) See Tan, Sandra “Proposal would make vacant public schools available to charters,” The Buffalo News, March 19, 2015 (“Why do we want to be landlords?” said Joseph Giusiana, the district’s executive director of plant services. The lease proposal discussed in the article never moved forward.). Even in New York City, where a 2014 state law requires the City to assist charter schools locate unused school space the current Mayor’s administration has resisted. (Campanile, Carl, “De Blasio administration violated law over charter schools,” New York Post, August 28, 2015).

See “Restrictive Covenants,” Diocese of Buffalo (Available at “http://preservationready.org/uploads/ Restrictive_Covenants.pdf) (Part B(VII) specifically states that building Grantee “shall not use, permit or suffer any Building(s) hereby conveyed to be used or occupied for purposes of a charter school...”).

In most large districts in New York, the City owns and holds title to the school buildings within the city; when the District no longer uses the building, possession is returned to the City. See Tan, Sandra “School Board again reverts to bickering,” The Buffalo News (March 25, 2015) (noting that the City informed the District that the District cannot legally lease city-owned buildings to charter schools).

See “List of Development Projects in Rochester, NY,” RocWiki (list of redevelopment projects in Rochester, including several former school buildings); see also Epstein, Jonathan “Two former Buffalo public schools proposed for low-income housing by nonprofits” The Buffalo News (October 15, 2015).

Such as those in the best condition, or in the most in-demand neighborhoods.

See “Buffalo Public Schools-List of Defunct Schools” Wikipedia (available at https://en.wikipedia.org/wiki/ Buffalo_Public_Schools#Defunct_Schools).

See “Wanted,” id. (Finn Academy ruled out two possible buildings because renovation costs would be prohibitively expensive).

Education Law §2854(3)(b-1) requires that a charter school enrolling more than 250 students within its first two years to collectively bargain with the teacher union of the host district, therefore charter schools start small and grow over their first term in order to avoid a hostile union.

See, e.g. NYSED P-12 Education Committee “Charter Schools: Initial Application and Charter Authorized by the Board of Regents,” (December 7, 2015) (available at http://www.regents.nysed.gov/common/regents/files/ 1215p12a3.pdf).

While charter schools are approved for an initial charter term of five years (Ed. Law §2851(1)(p)), an authorizer can revoke the charter at any point, even during the initial five-year term (Ed. Law §2855).

Ed. Law §2853(3)(b).

21. See §2853(d): “Private persons and organizations are encouraged to provide funding and other assistance to the establishment or operation of charter schools”; see also §2856(3): “…The board of trustees of a charter school is authorized to accept gifts, donations or grants of any kind made to the charter school…”

22. See Coalition for Community Schools, “Promise Neighborhoods and Community Schools,” (available at http://www.communityschools.org/assets/1/ AssetManager/PromiseNeighborhoods_CommunitySchools.pdf) (noting that “…schools are some of the most important anchor institutions” and that anchor institutions are “entities permanently rooted in specific locales- generating jobs, creating local business opportunities, and contributing in significant ways to the development of human, social and cultural capital.”).

23. See Neri, Joe, “Charter School Anchors St. Louis Neighborhood Revitalization,” Federal Reserve Bank of St. Louis, (Winter 2013-14) (available at https://www. stlouisfed.org/publications/bridges/winter-20132014/charter-school-anchors-st-louis-neighborhood-revitalization).

24. Riley, David, “Rochester may sell two former schools to charter operators,” Rochester Democrat & Chronicle (March 6, 2016).

25. Id. 26. “An act to amend the education law, in relation to charter school access to unused school facilities, property or land,” N.Y. S.5561A, (2015-16) (available at https://www.nysenate.gov/legislation/bills/2015/s5561).

27. Id. 28. Ed. Law §2853(3)(c).

29. All figures used in this section are pulled from reviewed audited financial statements, which charter schools are required to submit to their authorizer on an annual basis. Audited financial statements for all charters can be found on the NYSED CSO website (http://www.p12.nysed.gov/psc/csdirectory/CSLaunchPage. html). Alternatively, audited financial statements for charter schools approved by the SUNY Charter School Institute can be found at their website (http://www. newyorkcharters.org/progress/find-suny-charter-school/).

30. Northeast Charter Schools Network reviewed the Annual Schedule of Expenses for every charter school with available audited financial statements for 201314, 2014-15 and 2015-16. Charter schools and their accounting firms use different category names and titles to describe operational expenses, therefore every category that could reasonably be related to facility costs was extracted and compiled.

31. Share of total expenses is calculated by totaling the facility related expenses for a school, divided by the school’s total operating expenditures, drawn from the Annual Schedule of Expenses from the school’s audited financial statement.

32. Occupancy is an accounting category used by many schools to cumulatively consider one or more facility related expenses, such as rent and a facility management fee, rent and maintenance, mortgage-related expenses, etc.

33. This range is reached by applying the terms of §3853(3)(e)(5) to the 2015-16 expenditures of schools, with the low end multiplying total expenditures by average facility expenditures for 2015-16 (16.7%) and the high end multiplying total expenditures by the maximum facility aid (30%) permitted under law.

34. For 2016-17, $3 billion was allocated for the State’s Building Aid program. See New York State Education Department, “2016-17 State Aid Handbook,” pg. 14-15, available at https://stateaid.nysed.gov/publications/ handbooks/handbook_2016.pdf.Pg 12 - Under conclusion in the second line, make “school house” one word “schoolhouse” 35. The State’s funding formula is extremely complex. For a full explanation see Northeast Charter Schools Network, “Charter School Funding Formula (AOE/TAPU),” (Sept. 2014) (available at https://www.scribd.com/document/ 239744174/New-York-Charter-School-Funding-Formula-Explained). To quickly explain, the funding formula divides the ‘approved operating expenses’ of the home district, divided by the ‘total aidable pupil units’ to calculate an average per-pupil operating expense. The formula lowers this end figure in two ways: 1) by excluding certain expenses from the ‘AOE’ (such as capital expenses, e.g. facility-related expenses), and 2) by inflating the ‘TAPU’ number through ‘weighted’ figures for special education and high school students.

36. Ed. Law §2856(1)(a)(i-iii).

37. ‘Large city districts’ in this context include New York City, Buffalo, Rochester, Syracuse, Yonkers and Albany. These are the six largest school districts in New York State and include the vast majority of charter schools in New York State.

38. All per-pupil expenditure figures are pulled from the NYSED Office of Performance Improvement and Management Services Fiscal Analysis & Research Unit’s Fiscal Profile Reporting System (available at http://www.oms.nysed.gov/faru/Profiles/profiles_cover.html), which calculates an expenditure per-pupil figure for each district, the official measure used as the ‘Total Expenditure Per Pupil’ in each District’s Fiscal Accountability Report (available at https://data.nysed.gov/).

39. The “supplemental basic tuition” for schools which would see an increase in the “charter school basic tuition” was established as such: $250 for 2014-15, $350 for 2015-16, and $500 for 2016-17. Id 40. .Comprehensive budget data is not yet available 2015-16 or 2016-17.

41. §4, Part YYY, Chapter 59, Laws of New York, 2017.

42. Id. at (3)(e)(1).

43. Id. at (3)(e)(3).

44. Id. at (3)(e)(5).

45. §5, Part YYY, Chapter 59, Laws of New York, 2017.

46. See “A New Model Law for Supporting High-Quality Charter Public Schools: Second Edition,” National Alliance for Public Charter Schools (available at http://www. publiccharters.org/publications/model-law-supporting-high-quality-charter-public-schools/).

47. See also New York City Charter School Center, “A Guide to Provisions in State Law Affecting New York City Charter Schools,” 2-11 (July 7, 2014) (available at http:// www.nyccharterschools.org/sites/default/files/resources/ Guide_New_Law_FINAL.pdf).

48. Bergfeld, Tara, “Charter School Facilities,” Tennessee Comptroller of the Treasury Office of Research and Education Accountability (January 2016).

49. Id. 50. Decker, Geoff, “City set to begin paying millions for charter-school rent under new law,” Chalkbeat (April 29, 2015).

51. “A New Model Law for Supporting High-Quality Charter Public Schools: Second Edition,” National Alliance for Public Charter Schools (available at http://www. publiccharters.org/publications/model-law-supporting-high-quality-charter-public-schools/).

52. See “2016-17 State Aid Handbook,” New York State Education Department, (available at https://stateaid. nysed.gov/publications/handbooks/handbook_2016. pdf).

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53. States including Utah and South Carolina, as well as the District of Columbia, provide direct lending programs for charter schools that provide more favorable terms. See Bergfeld.

54. Under these types of programs, the State or a third-party entity ‘lends’ its superior credit rating to a charter school in order to assist the school in securing more favorable credit terms from a commercial lender. As discussed above, new charter schools lack a credit history and collateral, therefore often can only secure financing under unfavorable terms. Texas, Colorado and Utah are among the states offering such programs. Id. 55. Bond programs allow charter schools to secure lower interest rates and longer repayment terms, in line with similar municipal bonds. Some states, like Florida, allow charter schools to directly access the bond market, while others, including Arkansas, require charter schools to access the bond market through a third-party conduit organization. Id. 56. Id. i. Elmwood Village Charter School Financial Statements, June 30, 2009, http://www.p12.nysed.gov/psc/Elmwood.pdf ii. Elmwood Village Charter Renewal Application Site Visit Executive Summary, State Education Department O ce of Innovative School Models, September 2010,

http://www.elmwoodvillageschool.org/reportAccnt/documents/DepartmentofEducationExecutiveSummaryofEVCS.pdf iii. Elmwood Village Charter School Eyes Days Park, Bu alo Rising, March 25, 2009, http://www.bu alorising.com/2009/03/elmwood-village-charter-school-eyes-

days-park/ iv. Judge Tosses Sale of School 36 to Elmwood Village Charter School, Bu alo Rising, July 9, 2010, http://www.bu alorising.com/2010/07/judge-tosses-sale-of- school- 36-to-elmwood-village-charter-school/ v. Savarino Promises to Sue Over School 36 – Again, Artvoice, July 7, 2011, http://artvoice.com/issues/v10n27/week_in_review/savarino_promises_to_sue.html vi. Elmwood Village Charter School Acquires Former School 36 For Expansion, WNYMedia.net, November 28, 2011, http://wnymedia.net/2011/11/elmwood-village- charter-school-acquires-former-school-36-for-expansion/ vii. Application approved for second Elmwood Village Charter School, WBFO, April 14, 2016, http://news.wbfo.org/post/application-approved-second-elmwood- village-charter-school

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The Northeast Charter Network is a regional advocacy and membership organization for the more than 250 charter schools in Connecticut and New York. Its mission is to support and expand the high quality charter school movement in both states.

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