Audit: Mass. charter schools flush with cash

BOSTON—Most charter schools in Massachusetts are in strong fiscal shape, with the majority reporting cash surpluses at the end of each fiscal year, according to a report released Thursday by state Auditor Joseph DeNucci.

The audit found that in the 2006 fiscal year, 46 of 57 charter schools, which rely in large part on tax dollars, reported surpluses ranging from $398 to $2.3 million -- an average of $365,000 per school, or 8 percent of their revenue.

The report also found that as of June 30, 2007, charter schools in Massachusetts had combined net assets -- not including buildings, durable equipment and other assets that could not easily be turned into cash -- of $91.5 million, an average of $1.6 million per school.

DeNucci's office is still compiling information for the 2008 fiscal year.

Critics of charter schools -- public schools that operate independently of local school committees -- seized on the report.

Glenn Koocher, executive director of the Massachusetts Association of School Committees, said the report shows charter schools are "stockpiling large reserves" when other public schools are struggling to make ends meet.

"It cries out for reform of the charter school funding system," Koocher said. "If they've got money to give back, why don't they give it back to the people they took it from."

But defenders of charter schools say it's misleading to suggest they are rolling in cash. They say that, unlike traditional public schools, charter schools are barred from accepting money from the state's School Building Assistance fund.

Since they have to rent or lease their buildings, charter schools operators say they need to keep extra money in the bank from year to year.

"It's almost a necessity for a successful charter school to run a surplus," said Marc Kenen, executive director of the Massachusetts Charter Public School Association. "We took this report as a very favorable report about how charter schools are managing their finances."

While about 80 percent of funding for charter schools comes from the taxpayers, they can also accept private donations and grants.

According to DeNucci's report, charter schools have been steadily increasing their assets.

In the 2003 fiscal year, charter schools reported average cumulative net assets (including buildings and durable equipment) of $1.2 million each. Four years later, those average cumulative net assets had increased to $2.3 million each.

The wrangling over charter schools is heating up as the state's economy sinks.

Gov. Deval Patrick decided against cutting funding for public schools in the current year's budget, but has proposed level funding school spending in the fiscal year that begins July 1 -- a move that would likely force some cuts.

Patrick has also proposed a series of changes to the charter school system, including a plan to revise the way the schools receive state funds.

Currently, money for charter schools is funneled through local school districts based on a charter school's projected enrollment. If that enrollment falls short, the additional money isn't reimbursed to the districts until near the end of the fiscal year.

Under Patrick's proposal, the state would create a separate budget line item for charter schools to insulate school districts from the fiscal uncertainty.

Patrick also wants to allow the state's lowest performing school districts to add more charter schools, provided the schools agree to meet certain enrollment levels for limited English and learning disabled students.

Kenen said the association opposes both proposals. He said the first would create "a separate and unequal system" of funding charter schools. He said a separate line item would be more vulnerable than the state's main budget for public schools -- known as "Chapter 70" funds.

And while the association would welcome Patrick's proposal to allow more charter schools, Kenen said they are opposed to any effort to create "quotas."

Kenen said the charter schools are less concerned about a third Patrick proposal that would require the state Department of Elementary and Secondary Education to collect financial information about charter schools, including where they raised their money and what they plan to do with any surpluses.

DeNucci's audit also found that charter schools also have improved their financial reporting and bidding practices. Those changes came after an earlier audit found the state had trouble comparing charter schools because they used different reporting methods.