by Alison Heape Johnson and Josh McGee
This is the fourth in a series of posts on Arkansas school funding. In previous posts, we discussed:
- How Arkansas’ school funding formula works and a bit about its history;
- How Arkansas’ education spending compares nationally; and
- Whether Arkansas’ school funding is equitable.
In this post, we investigate funding and expenditures for open-enrollment charter schools, which are public schools that may enroll students no matter where they live and that have freedom from some regulations placed on traditional public schools (TPS), such as class size, teacher licensure, curriculum, etc. Rather than being operated by a traditional school district, they are operated by a charter management organization (CMO), which may operate a single school or a network of schools. In Arkansas, charter schools must be authorized by the state Charter Authorizing Panel and the school’s charter must be renewed every five years.
The 1999 law that initially permitted open-enrollment charters in Arkansas capped the number of schools at twelve. Since then, the legislature has revised the charter law several times to allow an increasing number of charter schools, most notably by increasing the cap on the number of charter schools allowed in the state and allowing charter schools to lease or purchase unused school district facilities at market values.
As a result charter schools’ enrollment and share of total public school enrollment have steadily increased (see Figure 1). By 2022-23, 24,776 Arkansas students were enrolled in 69 Arkansas charter schools, representing about five percent of total public school enrollment. In 2023, the LEARNS Act eliminated the cap on the number of charter schools that may operate in Arkansas, which will likely lead to more charter sector growth.
Figure 1: Open-Enrollment Charter School Enrollment as a Percent of Total Arkansas Public School Enrollment
Arkansas also has two provisions that allow TPS to operate like charter schools. First, a district conversion charter school is operated by a traditional school district but has been “converted” to be a charter school with similar flexibility. As of the 2023-24 school year, there were 34 district conversion charter schools. Second, Act 1240 allows school districts to request waivers from the state to be permitted flexibilities similar to the charter schools operating in their areas. As of the 2023-24 school year, 742 schools in 53 Arkansas school districts were operating under Act 1240 waivers. For example, Springdale School District, the largest in the state, currently operates under waivers from requirements regarding class size, teaching load, and teacher licensure.
For the purposes of this post, we will consider conversion charter schools and TPS operating under Act 1240 waivers to be TPS. We also exclude from our analysis any schools that primarily serve students with unique learning needs, including Arkansas Schools for the Blind and Deaf, Division of Youth Services schools, and specialized charter schools (AR Connections Academy, AR Virtual Academy, Graduate Arkansas, Hope Academy, Imboden Charter School, and Premier High Schools) to create a better apples-to-apples financial comparison.
How are charter schools funded?
Like TPS, open-enrollment charter schools are funded through the state’s funding formula that provides a base/foundation amount per pupil ($7,413 per student in 2023-24) with additional amounts for categories of students who need more support. However, the state requires traditional school districts to collect at least 25 mills (i.e., $25 in property taxes per $1,000 in property value) that offsets state funding in the formula. Districts are also allowed to raise additional local funds on top of the required 25 mills, that do not offset state formula funding. On average in 2022-23, TPS received about 39 percent of their revenue from the state and 39 percent from local sources, with the remainder coming from the federal government and other sources.
Charter schools, on the other hand, do not receive any local funds raised through property taxes. As a result, Arkansas charter schools receive most (72 percent in 2022-23) of their revenue from the state and very little local funding (<6 percent). Because they do not have the same access to local funding, open-enrollment charter schools tend to receive less revenue per pupil on average. For the 2022-23 school year, total TPS revenue was $15,878 per pupil, while for charter schools it was only $13,482, roughly 15 percent less.
Figure 2: Arkansas Public School Revenue by Source, 2022-23
How much money do TPS and charter schools spend?
In 2022-23, Arkansas’s open-enrollment charter schools spent $13,660 per pupil compared with TPS spending of $16,213 per pupil, a difference of about 16 percent. Over time, charter schools have consistently spent less per pupil compared to TPS (see Figure 3). When we examine average net current expenditures (i.e., excluding capital expenditures and debt service), the spending gap closes to about one percent in favor of TPS, indicating that most of the difference in spending between sectors is for capital and debt service.
Figure 3: Average Inflation-Adjusted Expenditures Per Pupil
Do TPS spend more because they serve students who need more resources?
It is possible that, relative to charter schools, TPS serve students whose educational needs require more resources, which might drive disparities in revenues and expenditures. The state’s funding formula explicitly allocates additional resources for students identified as an English Language Learner (ELL) and who qualify for Free- or Reduced-Price Lunch (FRL). As shown in Table 1, TPS serve a slightly larger share of students identified for FRL, but charter schools serve a slightly larger share of students receiving ELL services.
These differences are quite small, and when we estimate how large the revenue gap should be based on differences in shares of FRL and ELL students served, we actually find no gap. These two demographic categories do not explain the gaps in average revenues and expenditures between TPS and charter schools.
TPS also serve more students identified with special needs and students receiving gifted and talented (GT) services. The state does not provide additional funding for GT or for most special education services. However, the state allocates additional funding for students with severe special needs. TPS also operate Alternative Learning Environments (ALEs), which receive additional state funding. While students with severe special needs and in ALEs might explain part of the funding and expenditure gaps, these populations are relatively small, and these differences are unlikely to be the full explanation. Our initial analysis suggests that student demographic differences between the TPS and charter school sectors are not strongly related to differences in funding/spending.
Arkansas Public School Demographics, 2022-23
| TPS | Charter Schools | |
| Enrollment | 451,708 | 16,778 |
| Free- or Reduced-Price Lunch | 58.8% | 54.1% |
| Special Education | 14.3% | 9.8% |
| English Language Learner | 8.5% | 11.4% |
| Gifted and Talented | 8.7% | 2.5% |
How do expenditures vary across districts and charters?
Sector-level averages can mask a lot of variation within the TPS and charter school sectors. Figure 4 plots percent of students identified as FRL and expenditure per pupil for each TPS district (blue dots) and charter school (orange diamonds). Both TPS and charters exhibit a strong, positive correlation between the proportion of FRL students they serve and the amount they spend per pupil, modeled by the slopes of the dark blue dotted and orange dashed lines, respectively. The nearly identical slopes suggests Arkansas increases school funding according to student need similarly in both TPS and charter schools, even if there is a gap in average spending.
Figure 4: Expenditures Per Pupil by FRL Percentage, 2022-23
Do charter schools spend money differently than TPS?
Figure 5 shows TPS and charter school expenditures across five main categories: 1) instruction, 2) non-instructional services (includes food service, community operations, and other support services), 3) school-level services (includes school administration, instructional staff support services, and student support services), 4) district-level services (includes administration, central services, maintenance and operation of district buildings, and student transportation), and 5) other expenditures (includes capital expenditures, debt service, and other non-programmed expenditures).
Both TPS and charter schools allocate a similar proportion of funds to instruction, non-instructional services, and school level services. Unsurprisingly given their relatively smaller size, charter schools spent more per pupil on district-level services compared to TPS. It is also likely the case that the line between school- vs district-level expenditure categories may be a bit blurred for charter schools. Finally, TPS outspend charter schools in the “other expenditure” category.
Figure 5: Expenditures Per Pupil by Category, 2022-23
Conclusion
Arkansas charter schools, which have consistently grown in number and enrollment since the early 2000s, receive less revenue per pupil compared to traditional public schools, primarily because they do not receive local funds raised through property taxes. Charters have also consistently spent less per pupil since 2005-06. While there are some differences between the demographics and learning needs of students served by each sector, these do not seem to explain the gaps in revenues and expenditures. Policymakers should monitor and look for ways to improve funding equity between the TPS and charter sectors to help all Arkansas students reach their full potential.