The “Dirty Little Secret,” Millions of Tax Deductible Dollars Supporting Charter Schools …

Every month at the Board of Regents Meeting the Budget Committee meets, and, I really try and understand the complexities of the process. There are three sources of funding for public schools, local funding through property taxes, funding provided by state tax dollars and federal funding, if eligible.

Local funding is based on property taxes and property taxes are based on the dollar value of the property within the district; districts with multi-million dollar homes, districts with commercial property versus districts with no commercial property, no new home construction and low priced homes; the result is wide disparities in school funding.

The state part of the funding supplements the local funding; in other words, to the extent possible to make up for the huge disparity from district to district.

Some Examples of Per Student Funding

Statewide           $21,487

NYC                 $20,846

Buffalo             $18,648

Rochester          $19,955

Carthage            $17,807

Scarsdale           $28,977

East Hampton    $34,657

from presentation provided by the NYSED Budget Office

School districts determine how the dollars are divided up among schools in their districts; New York City uses a formula called “Fair Student Funding.”

The New York City funding by school is transparent, a few clicks allows you to access any public school in the city.

If you’re interested in a deeper dive this power point explains the bigger NYC school funding picture.

Charter schools receive funding from the school district under provisions of state law; see explanation of the formula here.

The “dirty little secret” is that many charter schools, and a few public schools, have another source of funding through the creation of 501 (c) 3 not-for-profits, philanthropy, tax deductible donations.

 What is a 501(c)(3)?

Section 501(c)(3) is the portion of the US Internal Revenue Code that allows for federal tax exemption of nonprofit organizations, specifically those that are considered public charities, private foundations or private operating foundations. It is regulated and administered by the US Department of Treasury through the Internal Revenue Service.

Other unique provisions tend to vary by state. Like federal law, most states allow for deductibility for state income tax purposes. Also, many states allow 501(c)(3) organizations to be exempt from sales tax on purchases, as well as exemption from property taxes.

501 (c) 3 organizations must file IRS form 990, the equivalent of a tax return, and, the forms are all available online.

You can access specific school info at the sites below:

I identified 120 charter schools with 501 (c) 3 accounts, there may be many more, and, the funds contain significant dollars


Success Academy Schools                             $59 million

Explore Charter Schools of Brooklyn          $15.9 million

Uncommon NYC Charter Schools                 $34.8 million

And list goes on and on, most of the schools have millions of dollars in their accounts. The form requires the listing of salaries paid, not other specific allocations. The 501 commonly pays for the salary of the principal and other school leaders; occasionally a director, a non-pedagogical title. The funds can be used for virtually anything, school trips, school supplies, building repairs or renovations, new furniture, computers, advertising, and on and on, the 990 form only requires the school to list expenditures in general terms.

The form does not require a listing of the contributors. The contributions are tax deductible.

The 990 form does require the listing of the expenditure for each year – dividing the annual expenditures by the school register and the sum added to the funds provided by the school district can be compared with neighborhood school funding; including the 501 dollars results in many charter schools having far greater dollars per student than the neighboring public schools. Not an even playing field.

Charter schools, as described below, are required to make “good faith efforts” to serve “comparable” enrollments of designated classes of students; however, the law does not define “good faith efforts.” Charters are issued for five years; the authorizer reviews school data in the charter renewal process; in spite of “good faith efforts.” charter schools frequently fail to reach comparable enrollments.

 the  charter   school   shall  demonstrate  good  faith  efforts  to attract and retain a comparable or  greater enrollment  of  students  with  disabilities,  English  language  learners,  and  students  who  are  eligible applicants for the free and  reduced price lunch program when compared to the enrollment figures  for  such  students  in  the  school  district in which the charter school is  located.

There is nothing in the law that limits charter school fund raising, or, makes any reference to external funding.

The intent of the law is to compare charter and public schools within the district, and, charter schools, sadly, frequently fail to enroll at-risk classes in comparable numbers, discharge students in large numbers and fail to backfill seats, and, commonly, have substantially greater per student funds due to 501 philanthropy. In other words, fail to comply with the letter and the spirit of the law.

The Board is considering changes Charter School Performance Frameworks; perhaps the Frameworks could clarify the intent of the statute.

A couple of years ago I was at an event at the Manhattan Institute, a conservative think tank. A panel of charter school leaders was discussing a range of issues; one of the leaders challenged the panel; he argued that unless charter schools forego philanthropy and backfill vacant seats they will never gain creditibility in the eyes of the general public. He was greeted with silence.

On the national scene we’ve moved beyond charter schools; the billionaires who have seized control of the conservative agenda (See excellent article in the NY Times here); are advocating for unregulated school choice; essentially a voucher system; public funds supporting a competition among schools; public, profit and not-for-profit charters, private, religious and home schoolers.

The days of the bake sale have morphed into well-paid directors of school 501 © 3’s  raising millions so that schools can “compete” with each other. I think Jefferson is rolling over in his grave.

“A system of general instruction, which shall reach every description of our citizens from the richest to the poorest, as it was the earliest, so will it be the latest of all the public concerns in which I shall permit myself to take an interest.” –Thomas Jefferson to Joseph C. Cabell, 1818.

Public schools in high poverty neighborhoods, already burdened with supporting homeless students, students with health issues, with food insecurity, now must compete with schools with far greater funding, either because of skewed funding formula or due to external dollars.

The next step will probably be the billionaire school choice crowd distributing copies of Jonathan Swift’s A Modest Proposal (A Modest Proposal for preventing the Children of Poor People from being a Burthen to Their Parents or Country, and for making them Beneficial to the Publick)

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