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Internal document shows LA Unified disputes some findings of UTLA-funded study on charter schools

Sarah Favot | June 21, 2016

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UTLA released its study on the fiscal impact of charter schools on May 10.

UTLA released its study on the fiscal impact of charter schools on May 10.

Six weeks ago LA teachers union officials told the LA Unified school board that independent charter schools were costing the district about $500 million each year.

School board member Monica Ratliff called on Superintendent Michelle King to provide the board an analysis of the union-funded study on independent charter schools from which the figure was derived. But the board has met as a full body at least four times since the report was released and has yet to discuss the report publicly. The board meets again today.

A district spokeswoman has been unable to say when the board will discuss the report.

An internal district document obtained by LA School Report shows that district officials have disputed some of the findings of the union’s study.

The union’s report was immediately criticized by district staff and others, as both inaccurate and an attempt to divert attention from far larger drains on the district’s finances. District officials were directed to refrain from commenting officially.

After LA School Report obtained the interoffice correspondence, King released a statement. The interoffice letter, dated June 14, was written by the district’s Chief Financial Officer Megan Reilly, Associate Superintendent Sharyn Howell, who oversees special education, and Jose Cole-Gutierrez, director of the district’s Charter Schools Division.

“The information that both our labor and charter partners have brought to the forefront regarding our financial situation is informative, valuable and appreciated,” King’s statement reads in part. “Our team will continue to scrutinize these reports as we create strategies for a successful future and the growth of a variety of high-achieving schools.”

The California Charter Schools Association issued a 10-page response to the UTLA study a week after it was released and sent it to King and members of the school board. The group called the union’s report “riddled with inaccuracies.”

“It draws sweeping and often irresponsible conclusions based on limited information and obsolete data,” the CCSA said.

An initial analysis by the Associated Administrators of Los Angeles (AALA), the district’s bargaining unit for middle managers, also found inaccuracies in the report.

UTLA said in a statement in the days after the report was released that it stood by its data used in the study and said the information was provided by the district.

The 46-page UTLA study was conducted by MGT America in December and January following the release of a report by the Independent Financial Review Panel in November.

The Independent Financial Review Panel projected that the district would face a $450 million deficit in three years, driven primarily by pension and healthcare costs.

In the 14-page interoffice letter, titled “Preliminary Review of UTLA MGT Report: Fiscal Impact of Charter Schools on LAUSD,” the district responds to each of the 12 findings in the UTLA report.

The first finding from the UTLA report is that the annual oversight revenue collected from independent charter schools does not cover the annual budget of the district’s Charter Schools Division, which is responsible for overseeing charter schools.

The district responded that the oversight fees generated this year will reach $9.4 million, while the Charter Schools Division expenditures are projected to be $8.3 million.

Days after the UTLA study was released LA School Report reported a similar finding that when the Charter Schools Division presented its budget in January, it showed that the department was collecting about $500,000 more from charter schools than it spends.

The union’s study included the cost of the office space that the Charter Schools Division occupies in the district’s headquarters at the Beaudry building as a cost that the revenue from oversight fees does not cover.

“Currently, no division is charged for the costs associated with facility use of the Beaudry building,” the memo says. “Staff will explore the possibility of charging a pro rata share of debt service costs for occupancy of this space.”

The study claimed that funds for oversight action by other departments within the district were not paid for through the oversight fees collected from charter schools, but the district response showed that nearly $1.4 million from the Charter Schools Division budget is allocated to the Office of the General Counsel, Data and Accountability, Accounting and Attendance and Enrollment for those departments’ costs.

One highly contested issue addressed in the report involved whether the district can charge a 3 percent oversight fee to the 56 charter schools that operate in district facilities.

State law limits the amount of money the district can charge an independent charter school for oversight fees to 1 percent of the school’s revenues. If the school receives “substantially rent free facilities” from the district, the district can charge a 3 percent oversight fee.

The district charges all charter schools a 1 percent oversight fee regardless of whether the schools are located in buildings owned by the district. It also charges charter schools located in district buildings a “pro rata share” of facilities costs.

LA Unified officials said the district collected $8.1 million during the last school year from the 1 percent oversight fee and the pro rata share. If the district were to collect 3 percent without the pro rata share, it would receive $4.6 million, according to the letter.

CCSA said in its response to the study that because the district charges a pro rata share, the facilities are not substantially rent free and the district cannot charge a 3 percent oversight fee.

The study pointed out that there are indirect costs to the district for independent charter school operations. The study estimates those costs reach $13 million.

“Staff will explore the feasibility of conducting a cost analysis to review indirect cost allocations,” the letter says.

The district did agree with some of the UTLA study findings, many of which were state funding issues. For example, the district agreed that it has a significantly higher proportion of special education students compared to independent charter schools.

CCSA contested this finding.

“The report uses a number of outdated and erroneous statistics that paint a misleading picture of both the proportion of students with disabilities in charters schools and the fiscal impact on the district,” CCSA wrote in its letter.

LA Unified has more charter students than any other district in the country, with 101,000 students in 221 schools, making up 16 percent of the district enrollment. Over the last decade, the number of charter schools has more than tripled.

The union report assumed that all students who attend independent charter schools would have attended LA Unified schools. However, a charter school can attract students from other districts, and some LA charter school students could have otherwise attended private schools or moved to another district.

The Independent Financial Review Panel’s report attributed half of LA Unified’s enrollment decline to charter schools. The rest of the decline was caused by demographic changes such as the drop in the number of children born in LA, it stated.

“Even if LAUSD had no more new charter schools, its enrollment would continue to decline due to demographic factors, factors that are not within its control, and that are unlikely to reverse in the coming years,” the panel concluded.

Marguerite Roza, a research professor at Georgetown University and director of the Edunomics Lab, wrote an op-ed in the LA Times following the release of the union’s study that advocated for districts to build their budgets based on the number of students it serves so that budgeting would be “inherently responsive to enrollment changes.”

“It’s hard for a district to shrink,” Roza said in an interview. “It doesn’t have much trouble growing. It’s harder to take away staff or contract.”

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