Five of Pennsylvania’s largest cyber charter schools have seen their reserves more than double since 2020, according to Pennsylvania’s Auditor General Tim DeFoor.
Wednesday’s audit found the charters — Commonwealth Charter Academy, Pennsylvania Leadership Charter School, Insight PA, PA Cyber, and Reach Cyber Charter School — held in their fund balances a combined $619 million in taxpayer funds as of June 2023.
While DeFoor said the schools had grown their reserves legally, he faulted the state’s decades-old Charter School Law for failing to “use actual instruction costs to determine tuition, set guidelines for spending or set limits for cyber charter school reserve funds.”
“The problem is the funding formula,” DeFoor said. “Until the funding formula is fixed, this problem is going to continue to happen.”
Lawmakers on both sides of the aisle have long taken issue with the Charter School Law provisions that set the tuition rates for cyber schools at the same levels as rates for brick-and-mortar charters.
Governor Josh Shapiro’s recent budget proposal includes a flat rate of $8,000 per cyber charter student — estimated to save school districts $378 million annually. Democrats and public school advocates hoped the tuition cap would make it into the last budget, touting a savings of upwards of $700,000 for some Allegheny County school districts.
But even with bipartisan support in the House, the change didn’t make it past negotiations with Senate Republicans, who have pushed for increased investments in charter and private schools.
DeFoor, a Republican, said changing the cyber charter tuition rate has nothing to do with school choice, an issue increasingly at the forefront of budget negotiations. Rather, he said, lawmakers must fix an outdated funding formula that allows cyber charters to grow their reserves to “excessive” levels.
“Reserves are meant to cover unanticipated bills so there's no interruption in a child's education,” DeFoor said. “It isn't money meant to sit in the bank of a cyber charter school growing year after year.”
According to the audit, cyber charters used their skyrocketing revenues on lavish staff bonuses, gift cards, vehicle payments and fuel stipends. Reach Cyber — which saw its fund balance more than triple over four years — paid more than $7 million in staff bonuses and provided more than $4 million in gift cards to students and families.
Auditors urged the school to carefully consider its expenditures to determine “the best use of taxpayer and public education dollars.” Reach Cyber responded to auditors by accusing them of following “an agenda of anti-cyber charter school policies.”
DeFoor also raised concerns over Commonwealth Charter Academy’s (CCA) use of $196 million to purchase or renovate 21 buildings, which he called “out of the ordinary” for a public school based online.
But in a statement, school leaders said the money went toward its Family Service Centers, “crucial for developing and maintaining a statewide school community.”
The charter school network operates a large service center in Homestead, where CCA teachers conduct virtual lessons, open house sessions and other events, according to its website.
CCA also attributed its growth in revenue to increased enrollment during the pandemic. All five schools audited saw their total enrollment jump from about 27,000 during the 2019-2020 school year to more than 44,000 in 2022-2023.
Allegheny County school districts spent over $86.5 million on cyber charter school tuition that same year, according to data provided by the state’s Department of Education. Tuition varies by district, ranging statewide from $7,000 to $25,000 per student during the years auditors reviewed.
Districts paid up to $60,000 for students receiving special education services. Last year’s state budget included $100 million to reimburse schools for some of those costs, though DeFoor maintained that the Charter School Law must be reformed to address the root of the funding concerns.
The Auditor General recommended the governor form a task force within the next six months to convene education officials, cyber charters, school districts and other stakeholders. The group would have nine months to develop a more equitable funding formula, and DeFoor recommended the lawmakers enact that plan within six months of receiving it.
“It's a tight time frame, but we really can't delay any longer. It's already been 23 years,” he said. “Our recommendation is a nonpartisan, systematic approach to make sure that there are sufficient funds available for cyber charter schools to operate while at the same time protecting our taxpayer dollars.”
