Interview with Gregg Vanourek and Todd Ziebarth on Economics: The Marketshare of Charter Schools

When folks talk about the "market share" charter schools are obtaining, they
may cite a still-modest national number (only 2% of all public school
students). Or they may look at state-level numbers (Arizona leads the pack,
with 8% in 2005-06).

What's often neglected is the growing market share of charters in an
increasing number of individual communities. Using that perspective, the
National Alliance for Public Charter Schools recently finished a major data
gathering effort to identify which communities with at least 10,000 public
school students had the highest percentages of public school students
enrolled in charter schools during the 2005-06 school year. We set out to
compile a “Top Ten” list; due to numerous ties, there were actually 19
communities that made the list.

We found that charters had a market share of at least 13% in 19 communities.
In six of those communities, it was at least 20%. The community with the
highest market share was New Orleans, where 69% of public school students
were enrolled in charter schools by the end of the 2005-06 school year.

To date, there hasn’t been much statistical research conducted on the
benefits of charter schools to taxpayers. However, the National Alliance for
Public Charter Schools is stepping into this fray later this fall, via an
issue brief by Public Impact that will paint a clear picture of the
financial impact of opening a charter school on both a district and a
community.

Some quantifiable benefits of high-quality charter schools to taxpayers that
they’re addressing are: potential increase in real estate value; decrease in
the number of high school dropouts; increase in college attendees and
graduates; and, increased overall education funding.

They’re also some less quantifiable benefits that they discuss.
Community-based organizations, for example, are using charter schools to
expand their variety of services and provide “one-stop shopping” to the
populations they serve. Urban charters are keeping young, urban,
middle-class parents in city neighborhoods by providing a high-quality
education – leading in turn to more diverse classrooms and a more stable
economic base. And, charter schools are renovating an rehabilitating empty
and dilapidated properties to provide a quality facility for their schools.

Virtual charter schools (also known as online charter schools, cyber charter schools, and e-charter schools, depending on which state you live in) are a rapidly growing segment of the charter school sector. Out of 40 states with charter schools, you’ll find virtual charter schools in less than half of those states, in many cases because it’s not yet clear whether they are allowed in those (non-virtual) states. The charter school movement has been an “early adopter” of virtual learning technologies—i.e., charters are more likely to “go virtual” than district public schools.

As I wrote in a recent National Association of Charter School Authorizers Issue Brief, according to the Center for Education Reform, there are now 147 virtual charter schools with 65,354 students in 18 states, up from 86 such schools with 31,000 students in 13 states in 2004-05 and 60 such schools in 13 states in 2002-03. While charter schools presently comprise only about 4 percent of all U.S. public schools (and enroll about 2 percent of public school students), they currently constitute about 20 percent of all unique online learning programs (a number that is surprisingly difficult to pin down). Virtual charter schools comprise about 4 percent of all charter schools and enroll about 6 percent of all charter school students.

What’s happening in the states? According to the latest data that I’ve seen, Ohio has more than 40 e-schools enrolling about 17,000 students, comprising about a third of all virtual charter schools nationwide, but most of the schools are very small. Pennsylvania has 12 cyber charter schools (three of which are managed by educational management organizations or “EMOs”) with more than 13,000 students—about 10 percent of all charter schools in the state and a quarter of all charter school students. Wisconsin has 13 virtual schools, many of which are charter schools. [Senn, do you have updated numbers on this front?] Idaho has four virtual charter schools and a state-sponsored virtual school called the Idaho Digital Learning Academy. In Arizona, more than 10,000 students took at least one class through virtual schools in 2004-05, many of them through virtual charter schools. In Colorado, 5,730 students took courses over the Internet this year, and some of the largest programs are online charter schools.

Virtual charter schools benefit greatly from “open enrollment” laws that allow students to cross district boundaries, and they are questioning some our assumptions about time and distance in learning and schooling.

This is a great question but tough to answer. There is active debate within the charter movement about how to measure success, ultimately. Some argue that the charter movement needs to induce the (now much) larger public school system to improve, perhaps through “outside-in” forces such as competitive pressure and/or through “inside-out” practices such as capacity-building, sharing of best practices, etc. Others argue that charter schools should focus not on changing district school systems (which may or may not have the will or capacity to change) but rather on providing high-quality options for schoolchildren, particularly those who are currently being underserved. Some argue that the point is not just quality growth (as above), or district transformation (as above), but replacing the entire system with something charter-like—including deregulation, choice, innovation, accountability, authorizing, etc.—as well as all (or mostly) charter schools.

How you measure success depends in large part on where you come down on these big questions. I would argue that we should be measuring and observing on all these fronts and learning from the complicated phenomenon of charter schools how we can improve education for all schoolchildren.

The growth in the charter market remains strong. While the growth rate continues to decline because the base on which it is calculated is larger every year, the absolute number of new charter schools and students each school year remains high. For example, here are the number of new schools per year for the past three years: 448 (2004-05), 320 (2005-06), 400 (estimated for 2006-07).

The primary driver of growth is parental demand. In many cases, this demand is from parents in urban districts who are frustrated with the performance of the traditional public schools. In some cases, though, it's coming from parents in rural and even suburban areas who want something different than what the traditional public school is offering.

I don’t have much data on this one, only a sense. For what it’s worth, I think that virtual charter schooling is a big growth area. There is tremendous capacity for many of these schools to “scale up” to serving several thousand students statewide, instead of the typical school of several hundred. These school serve a wide population of students, from gifted and talented to struggling.

Another growth area that I see is in charter schools operated by charter management organizations (CMOs). These CMOs, as nonprofit organizations, are distinct from EMOs (education management organizations) such as Edison Schools, National Heritage Academies, and Charter Schools USA. There are major philanthropic funds out there seeking high-quality charter operators and then working to replicate their successes in new markets.

Surely there are other growth areas as well. Which ones are you seeing out there?

As for whether the new growth areas for charters have a role to play in improving special education services, I don’t know (though I certainly hope so). Though charter schools have been free to innovate on many fronts, many of them struggle with the bureaucratic and paperwork challenges associated with our existing special education regulatory regimes.

Any discussion of charter school funding should begin with this startling finding from a recent study by the Fordham Institute: The average public charter school receives 78% of the funds that a traditional public school receives. That enormous discrepancy is primarily due to the fact that charters often don't get access to captial or local funding.

To help make up this difference, many charter schools fundraise from a wide range of individuals and organizations. Sometimes, a fundraising campaign is focused on building a new facility. In other cases, these efforts are geared toward supporting the day-to-day operations of a charter school.

I haven't seen any data in answer to your question about the ratio of private donations to state funds received by the average charter school. Not surprisingly, I believe that it varies from school to school. In Illinois, for example, charters on average attracted more than 15% of their funding from private philanthropy in 2002-03. In other places, charters haven't relied much on it.

Given that 448 charter schools were added in 2004-05, 320 in 2005-06, and about 400 (estimated) for 2006-07, we can calculate the 3-year average at about 389. Projecting out over a decade that would mean an additional 3,890 charter schools. Today, there are about 93,000 public schools and nearly 50 million public school students. In 10 years, we could have roughly 8,000 charter schools and 2 million charter students, but what's less clear to me is the expected growth rate of public school students and schools (with the former likely to outpace the latter).

Without drastic changes to the trends (e.g., big breaks owing from a wave of NCLB closures, etc., which are difficult to predict), I'd expect charters to have a market share of 6-8% of public schools and 3-4% of public school students in 10 years.

What will be more interesting, though, will be the market share in various communities. By then, we could have majority-charter jurisdictions in lots of places (not just New Orleans, as we see today). It will be very interesting to watch.

This is very difficult to answer because school district operations are not what I would call transparent. Another related question on my radar lately is this: Can districts be transformed, given their current structures, systems, incentives, and people? This is a question both of their will and their capacity to transform. And is there a tipping point of charter school market share that will induce districts to transform—a threshold at which districts will transform—and is it achievable in lots of places?

I think there are many barriers to the competitive impact that many charter school leaders expected and pushed for: funding shenanigans that can muffle charter competition, regulatory inhibitors, some insularity in both the district and charter sectors, antipathy toward charters, waves of attack against them, messaging and (uneven) quality problems within the charter movement, lack of awareness among the general public and more. Much of what we do see is cosmetic, or PR, or not lasting. There are lots of valiant efforts going on to improve school systems, and some major advances (that are still a work in progress, like Philadelphia, Chicago, and New York—all of which still have major problems, though).

The bottom line is that we’re not seeing the levels of school system improvement that we need, and particularly for African-American students and others who have been continually underserved by our existing systems.