Chapter 2 : The Public Charter Schools Program (PCSP)

PCSP appropriations have grown steadily larger as the number of states with charter school laws has increased (see Exhibit 2-1). At the time of the data collection on which this report is based (fall 1999), 36 states plus the District of Columbia and Puerto Rico were eligible to apply for PCSP funding. Of those that had charter school legislation in fall 1999, only three (8 percent) had never applied for a PCSP grant (Nevada, Mississippi, and Wyoming), although not all applicants had yet been successful in obtaining a grant.

Along with the steady increase in the annual appropriation for the PCSP, the size of the average state grant has also consistently grown. Exhibit 2-2 displays annual summary statistics about PCSP funding to states.

There is considerable variation in the size of PCSP grants to states. For example, in 1998, Delaware received about $541,000, and California received nearly $9 million. In part, the federal determination of grant amount is based on the projected number of eligible charter schools to be supported in a state in a given year. Other factors are also considered, however, including the cases that states make in their proposals about charter school needs in relation to state policies and regulations for charter schools. In the first few years of the PCSP, a number of states underestimated their needs. As larger appropriations became available, the PCSP Office staff worked with these states to make better estimates and to provide additional funding through supplemental awards. In Appendix C, supplemental awards have been combined with basic grant amounts to produce annualized totals per state.

In states with charter school legislation that do not have a state PCSP grant (either because the state didn?t apply or its application was rejected), the PCSP legislation allows ED to award funds directly to charter schools. Seven states have schools that have received funds directly from ED, either currently or in the past. These states are Arizona, Arkansas, Hawaii, Mississippi, Nevada, New Hampshire, and New Mexico. (A planning group received funds in Arkansas, prior to charter award.) The number of schools receiving funds directly from ED grew from 2 to 40 between 1995 and 1999. This growth is due mostly to the large number of direct-funded charter schools in Arizona, starting when the state was ruled ineligible for a state grant in 1997. In contrast to the pattern with state grants, where grants to states and subgrants to schools have both increased, the average amount of direct grants to charter schools decreased as the total number of these grants grew larger.

The federal Public Charter Schools Program has quickly become an important source of start-up funding for charter schools in most states with charter school legislation. According to state survey data, PCSP grants are a source of start-up funds in 35 of the 38 states contacted (92 percent).⁴ In 14 of the 35 states, the PCSP is the only source of start-up funds for charter school planning and early implementation. In others, additional sources are available, as Exhibit 2-3 shows. The remaining 21 also rely on one or more of the following types of resources: state funds, funds provided by the charter school authorizer, or other sources of funds that include foundations and the private sector.

Exhibit 2-3
REPORTED SOURCES OF CHARTER SCHOOL START-UP FUNDS
(Source: 1999-2000 Survey of State Charter School Coordinators)

The pattern of growth in the number of PCSP subgrants awarded annually mirrors the growth in the number of states with charter school legislation, the number of states eligible for PCSP grants, and increases in PCSP appropriations. In general, more and more new and developing charter schools are benefiting from the availability of the federal funds. In some states, however, the pattern is more variable (see Exhibit 2-4). There are no consistent reasons for this variability. In Pennsylvania, for example, the number of subgrant awards dipped slightly from 1997 to 1998. In Connecticut, growth in the number of charter schools is slow; therefore, existing charter schools are "aging out" of eligibility for PCSP funds and not being replaced by newer schools.

The survey of charter school authorizers also confirmed the importance of PCSP start-up funds to the continuing development of the charter school movement. Charter school authorizer representatives reported that PCSP subgrants were a common source of start-up funds for schools sponsored by at least 69 percent of the authorizer sample. This figure was probably even higher, since 23 percent of authorizer respondents did not know whether their state or sponsored schools received PCSP funds. (Only 8 percent of the authorizers knew for sure that their schools had not received subgrants.)

One final, indirect indicator of the importance of the PCSP to charter schools comes from 4 years of data compiled for the National Study of Charter Schools, conducted by RPP International. In each year of this study, new charter school operators were asked to identify barriers to opening their schools. In 1995-96 and 1996-97, the lack of start-up funds was identified by nearly 60 percent of survey respondents as the greatest single obstacle that they faced (59 percent in 1995-96 and 55 percent in 1996-97). By 1998-99, lack of start-up funds remained the number one barrier, but the proportion of respondents from new charter schools identifying it had dropped to 39 percent (RPP International and the University of Minnesota, 1997; Berman et al., 1998; Nelson et al., 2000). Although this change in the intensity of the problem cannot be attributed directly to the PCSP, the authors of the study?s fourth-year report speculate that the combination of the PCSP and the availability of some state start-up funding was making a difference (Nelson et al., 2000, p. 44).

PCSP grants are awarded competitively, whether to states or to individual schools in states that do not receive grants. The existence of a state charter school law does not guarantee that a state will receive a PCSP grant. According to staff of the PCSP Office, several state applications have been denied over the years for reasons that range from the fact that no charters have been awarded to concerns about equity to questions about the planned state strategies for supporting charter schools.⁵ However, most states where charters have actually been awarded have eventually received funds. Because of the competitive process, the program has not necessarily funded all the individual schools that apply directly to ED in a given year.

The PCSP legislation specifies that state grantees may reserve up to 5 percent of their total grant for administrative purposes at the state level. Some states have tried to have this rule waived to keep more money for purposes such as evaluation or establishing and supporting a state charter school resource organization. According to PCSP Office staff, no exceptions have been made.

The amount of funding for state administration of the PCSP program is relatively modest. On average, based on 1998 state grants, a state had about $130,000 for administrative purposes. Most state coordinators indicated that they do retain 5 percent of their total funding, but some states hold back smaller amounts. For example, in 1998, the state educational agency in Georgia reserved only $10,000 (less than 1 percent) of its $2,421,053 grant. Appendix C shows the amounts that states had available for subgrants in each year of funding after their allowable or actual set-asides were deducted from the total grant amount.

Seventeen states provided a breakdown of the state portion of their PCSP grant for 1998-99 (see Appendix D). The budgeting categories requested by the SRI team matched the budget page in the PCSP application. The largest expenditure category is salaries, with a mean of about $45,000 allocated to this purpose per state.

Prior to this data collection effort, it was unclear whether charter school authorizers played a significant role in the flow of PCSP funding from the state to a charter school. On the basis of a sample of 48 charter school authorizers, the answer is straightforward: unless the charter school authorizers were state bodies, they had very little involvement in decisions about PCSP funds. In addition, unless the charter school authorizers were state bodies, they did not receive PCSP funds for their own activities. Although charter school authorizers often functioned as the flow-through agencies or fiscal agents for disbursing PCSP funds, this relationship rarely entailed other types of involvement or withholding. In fact, only two school districts reported receiving a share of a subgrant. (Appendix E provides a percentage breakdown of charter school authorizers receiving PCSP funds.)

States have taken primarily two approaches to distributing subgrants: (1) a subgrant competition with winners and losers in which charter schools or charter school planners respond to a request for proposals and are rated and ranked (67 percent) and (2) a calculation that distributes the available PCSP funds for subgrants to all eligible charter schools or planners in the state (43 percent). These approaches are not necessarily mutually exclusive. (Appendix F provides additional information on how states award PCSP subgrants.)

Some states staged their subgrant awards and employed both distribution methods, often awarding an equal lump sum as a planning grant to all groups with newly awarded charters. Implementation grants might then be competed or awarded by a formula that took into account various factors but generally included an enrollment size variable. For example:

• Massachusetts awarded an equal, lump sum planning grant following charter approval. Implementation grants were awarded by a formula that accounted for enrollment, year of implementation, and other factors.
• North Carolina distributed 80 percent of available subgrant funds equally among all eligible charter schools. The remaining 20 percent was distributed by a formula based on enrollment.
• Colorado awarded subgrants competitively but also applied an enrollment formula to the selected subgrantees.

Many states preferred to award PCSP subgrants in annual installments to control for the possibility that efforts to start a charter school might fail or flounder. In the states where this had happened, any PCSP funds that were withheld from a failing enterprise were generally redistributed to other charter schools.

In their subgrant award processes, some states establish priority factors for targeting some or all of the funding. For example, 36 percent of respondents gave priority to applicants from schools that do or will serve special student populations, and 14 percent targeted schools located in low-income communities. (Appendix G provides additional information on those factors given priority in the subgrant process.) Other priority strategies were idiosyncratic to a state. For example, Connecticut had a statewide educational priority to reduce the racial isolation of students. Charter schools that addressed this goal were eligible for a supplemental PCSP grant. The District of Columbia Board of Education focused particularly on first-year schools, whereas New Jersey intended for 50 percent of its charter schools to be in urban areas and distributed PCSP funds accordingly. Puerto Rico also targeted its PCSP subgrant awards to applicants who focused on technology, innovative practices, and teacher training.

Whether a state has set priorities or not, most states apply some criteria in making subgrant awards and determining funding levels (see Exhibit 2-5). A state ceiling on the award level for subgrants was applied by a total of 18 states?the most commonly reported response category in the exhibit. The grant applications that the states themselves submitted to ED were often based on theoretical projections about the numbers of charter schools that they expected to support and the stages of development at which those schools would be in any given grant year. This logic translated into a maximum subgrant amount that the states planned to award to an individual school over a 3-year period. States, therefore, think in terms of ceilings or caps on subgrants. For example, an Ohio respondent reported that the state has set a maximum of $150,000 per charter school for PCSP-funded implementation grants. (Planning grants in Ohio come from state funds.) Missouri expects to award subgrants up to a maximum of $80,000, and Virginia is considering a $100,000 cap.

The majority of states reported that the quality of subgrant proposals is important in determining subgrant recipients and funding levels. Even if the overall subgrant award strategy that a state uses is not competitive, the application process sometimes involves multiple stages of review, comment, and revision before an award is made. A number of states issued elaborate subgrant application packages. In Colorado, California, and Illinois, the application package included the scoring rubric that would be used to rate and rank the proposals, making the quality criteria clear and systematic for applicants. Twenty-four states reported that they used some type of proposal review process with panels or committees of reviewers. (Appendix H provides detail on the criteria used to award PCSP funds, by type of subgrant.)

In later reports, SRI International will report on the number of schools receiving subgrants, the range of subgrant amounts, and the use of PCSP funds in charter schools.

Definitions of what constitutes the "planning" period are particularly variable among the PCSP states. Much of the variation can be attributed to the chartering process specified by a state?s charter school law, since some specify the length of planning periods and others are more flexible on the time allowed between the charter award and when the school is operational. Among the 24 states that make some distinction between types of subgrants (e.g., planning, implementation), 5 states (20 percent) award planning subgrants to groups that have not yet received a charter from a charter school authorizer; 4 states (17 percent) award subgrants to groups with a preliminary charter that will not be finalized until a charter school actually opens; and 15 states (63 percent) award subgrants to schools that are fully chartered but not yet open for business. Exhibit 2-6 displays eligibility criteria for planning subgrants. (In addition to different definitions of what constitutes the planning period, state grantees may also define those entities eligible to receive PCSP subgrants. Appendix I provides an overview of eligible PCSP recipients, by type of subgrant.)

Finding: The use of PCSP subgrant funds is largely unrestricted.

Once subgrants are awarded, most states place very few restrictions on how the subgrantees can use the money. Major construction costs are barred by federal rules, although minor renovations could be undertaken with PCSP funds with permission of the federal program office. Most states reported that they barred charter schools from using subgrants for purchasing facilities, but many allowed the money to be applied to renting and leasing of space. Application packages often listed examples of allowable activities but specified that the list was suggestive, not comprehensive.

However, on the basis of their growing years of experience in working with new charter schools, some state coordinators and charter school offices reported that they were becoming more proactive in steering schools and planning groups toward more specific uses of PCSP funds. In Massachusetts, for example, planning grants were relatively unrestricted, but implementation grants had designated categories (e.g., student assessment, evaluation, dissemination), and charter schools were required to allocate funds to these and other categories. Colorado emphasized the same uses without actually designating budget allocations. Texas required subgrantees to use some funding to support Internet access.

Exhibit 2-6
ELIGIBILITY CRITERIA FOR PCSP PLANNING SUBGRANTS

Although its funding levels have grown quickly, the PCSP nevertheless remains a relatively small federal program with a relatively circumscribed constituency. These circumstances, plus the charter school movement?s sense of itself as a "cause," have encouraged close working relationships between the federal program office and the field.

The PCSP is administered by a small program office that is housed within the Office of Elementary and Secondary Education of the U.S. Department of Education. The PCSP Office has a Director and approximately four other staff to oversee the grant-making process, the monitoring of grantees, and the development and implementation of national charter school activities.⁶

PCSP staff and representatives of other offices in ED have formed a collaborative, Departmentwide team on school choice issues. This team drafted the proposal for the reauthorization of the PCSP in 1998. In addition, the team has collaborated on developing final regulations designed to ensure that new and expanding charter schools receive the funds for which they are eligible under other federal programs, such as Title I and special education. These final regulations were published in December 1999. The PCSP is also involved in the development of nonregulatory guidance on this issue. Data from the survey of state coordinators indicate that two-thirds (66 percent) of state grantees have found federal staff to be responsive and helpful regarding questions about charter schools and federal entitlements.

In October 1998, Congress reauthorized the PCSP legislation. The reauthorized law seeks to put policy pressure on states to increase both flexibility and accountability for charter schools. For example, to enhance flexibility for charter schools, states are strongly encouraged to allow at least one other type of charter school authorizer besides local educational agencies and to ensure that charter schools have autonomy over their own budgets and expenditures. On the accountability side, states that review each operating charter school at least once every 5 years are given priority in the application process. (In some states, it is currently 15 years before a charter comes up for renewal.)

The new emphasis in the reauthorized PCSP statute on giving charter schools elbow room and regularly holding them accountable appears to have had a moderate impact on provisions in state charter school laws and regulations in the year since enactment. The survey of state coordinators found that seven state officials believe that the reauthorized federal law has led to changes in state charter school policies. These include:

• More frequent review and evaluation of charter schools.
• An increase in the number of agencies allowed to charter.
• Addition of an appeals process for charters that are denied.
• An increase in the number of charter schools allowed.
• An increase in the degree of charter school autonomy allowed.
  

Independent of the federal legislation, many states have adopted different combinations of these provisions on their own in new or amended charter school laws.

To inform policy-making and contribute to documentation of the development of the charter school movement, the PCSP also uses its national activities set-aside to support an extensive research and demonstration project agenda. Appendix J summarizes the research, demonstration, and evaluation projects that were supported with PCSP funds from 1995 through 1999. Most such projects are funded through contracts with ED.

The research and demonstration projects have been designed to investigate issues that are of interest or concern to the charter school movement, but intended audiences are far broader and include policy-makers and the education community at large. The PCSP Office is in the process of identifying a new set of research needs and issue areas concerning the continued development of the charter school movement. The new agenda is being informed by focus groups with charter school authorizers and charter school developers and operators, as well as debriefing conferences with researchers.

The PCSP Office has been responsible for organizing, supporting, or simply participating in a variety of networking and information-sharing activities using a number of different strategies. These include multiple on-line networks and discussion groups for various stakeholder groups?for example, charter school operators, charter school authorizers, and state coordinators. The program office also planned and organized two well-attended national charter school conferences (November 1997 and March 1999) and has helped shape a popular charter school Web site (www.uscharterschools.org). All of these activities have helped to broaden and shape the discourse on public school choice.

The national evaluation of the PCSP program has been asked specifically to address research questions concerning the availability and effectiveness of technical assistance provided by program staff to the field. Recipients of PCSP grants were asked about technical assistance needed and received in the context of preparing their proposals and their annual reports. In general, states and charter schools applying directly to ED for a PCSP grant perceived greater need for technical assistance at the application stage (see Appendix K). We then asked those respondents who had needed assistance where they had gotten it. The results are shown in Exhibits 2-7 and 2-8. Federally sponsored sources (ED staff, the U.S. charter schools Web site, and national conferences) were named most frequently.

Survey respondents were also given the opportunity to comment on the quality of the technical assistance that they received from the PCSP Office and other sources. In terms of the application process, 20 of 27 respondents (74 percent) were generally satisfied or very satisfied with the process and the assistance received, whereas 5 respondents offered significant criticisms of both application processes and the responsiveness of the staff. Fewer respondents had comments about the annual reporting process, and 63 percent of states were satisfied with the help received. Critics of the technical assistance relationship at the reporting stage focused on the lack of clarity and guidance about how to handle carryover funds from one grant period to the next.

⁴In two of the three states reporting that PCSP funds are not a source of start-up support, some charter schools were receiving grants directly from ED. The third state, Wyoming, has neither charter schools nor a state PCSP grant.

⁵ On the state coordinator survey, nine states noted that their applications for PCSP funds had been denied one or more times.

⁶ Current law allows up to 5 percent or $5 million of appropriations to be held at the federal level for national activities (research and demonstration projects, national conferences, etc.). The original legislation allowed 10 percent.

Chapter 1

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Chapter 3