Fitch Ratings 'Charter School Rating Criteria: Exposure Draft' & anticipated negative effect

“TEXT-Fitch updates Charter School rating criteria.” Reuters, 9/19/2012

Sept 19 - Fitch Ratings has updated its Charter School Rating Criteria, incorporating the proposals detailed in 'Charter School Rating Criteria: Exposure Draft' dated July 19, 2012, and available at www.fitchratings.com.

The main proposals from the exposure draft that have been incorporated into the criteria are:

--Increased Emphasis on External Risk Factors

Fitch believes the operating model for charter schools exposes these entities to substantial external risks that are often outside the direct control of management. These include political risk, regulatory risk, and competitive risk. The agency will place greater emphasis on these qualitative factors in assigning charter school credit ratings.

--Conditional School District Cap on Certain Charter School Ratings

Fitch will assess the strength of any mechanisms in place to prevent interruptions in the flow of funds to charter schools when a school district serves as authorizer or as a pass-through for per-pupil funding. Where such mechanisms are limited or non-existent, the agency will cap the charter schools' ratings at the level of the school district.

--Operating History and Renewal Threshold

Given the fundamental nature of renewal risk, Fitch will rate as non-investment grade any schools that have less than five years of audited operating history and no charter renewals. This standard will also apply to transactions with multiple charter schools (pooled transactions) such that only those schools that meet the threshold will be included in Fitch's assessment of historical pro forma maximum annual debt service (MADS) coverage (see below for more details). The only possible exceptions to this requirement will be when initial charter terms exceed five years and Fitch can sufficiently assess a school's likelihood of renewal.

--Historical Financial Performance Expectations

Most charter schools lack the history of audited financial performance to support an investment grade rating. The updated criteria identify a set of baseline financial attributes Fitch considers appropriate in order to consider a charter school for investment grade. They include sum sufficient pro forma MADS coverage, and pro forma MADS burden (as a percentage of operating revenues) of 15% or less. Very few rated schools exhibit all of these attributes from audited financials.

Fitch thanks the various external parties (including investors, underwriters, financial advisors, and industry associations) who provided feedback during the exposure draft's comment period. The agency reviewed and carefully considered all feedback. The updated criteria report includes multiple results of the suggestions and clarification requests received during the comment period.

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"Fitch puts charter school bonds on review for possible downgrade." Reuters, 9/19/2012

(Reuters) - Fitch Ratings on Wednesday placed all bonds issued on behalf of charter schools on ratings watch negative, saying it believes that application of its recently published 'Charter School Rating Criteria' will negatively affect charter school ratings at all levels.

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Charter school expansion has led to more segregation

“New report provides solutions to reverse disturbing trend of segregation in charter schools; Expansion of charter schools has led to schools being more segregated today than 30 years ago.” Press release from Great Lakes Center for Education Research & Practice, 2/21/2012  

EAST LANSING, Mich. (Feb. 21, 2012) — The expansion of charter schools has led to classrooms being more segregated today than they were 30 years ago, according to a new report released today that provides policymakers with detailed recommendations on how to ensure all students have access to a quality education.

Some of the nation's most segregated schools are charter schools, where students are often isolated by race, income, language and special education status, according to the report, authored by Julie F. Mead of the University of Wisconsin and Preston C. Green III of Penn State University. For example, 43 percent of black charter school students attend schools that are 99 percent minority, according to Mead and Green's report. Meanwhile, less than 15 percent of black students in traditional public schools attend such highly segregated schools, according to the report.

"Growth in the charter school sector for the mere sake of growth neglects the central justification for their existence: to improve the current public educational landscape for children and their families," Mead and Green wrote in their report. Improving education means serving "all children regardless of race, ethnicity, socio-economic status, language, disability and gender," Mead and Green wrote.

Mead and Green's report provides numerous detailed recommendations to improve access for all students. Among Mead and Green's recommendations:

Charter schools should be required to submit detailed recruitment plans to ensure they are targeting a diverse student applicant pool representative of the broader community.

As Congress considers the reauthorization of the No Child Left Behind Act, states should be required to submit written equal opportunity plans prior to receiving federal funding for charter schools.

Require states to collect data regarding charter school recruitment, retention and discipline.

Released in tandem with this report is a companion report which offers model legislation to carry out those recommendations.

Both reports, Chartering Equity: Using Charter School Legislation and Policy to Advance Equal Educational Opportunity and Model Policy Language for Charter School Equity were produced by the National Education Policy Center with funding from the Great Lakes Center for Education Research and Practice. In addition, the Ford Foundation provided funding for Chartering Equity.

Both reports are available at: http://www.greatlakescenter.org.

They are also available on the NEPC website at: http://nepc.colorado.edu/publication/chartering-equity

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Schools operated by major CMOs generally spend more than surrounding public schools

“Charter Schools: How Many Bucks for the Desired Bang?” National Education Policy Center press release, 5/3/2012

BOULDER, CO (May 3, 2012) — Do charter schools live up to their supporters’ claim that they deliver a better education for less money?

While previous research has focused on the first half of that claim – education quality -- a new report published by the National Education Policy Center examines the second half – what charters spend.

Schools operated by major charter management organizations (CMOs) generally spend more than surrounding public schools, according to Spending by the Major Charter Management Organizations: Comparing Charter School & Local Public District Financial Resources in New York, Ohio and Texas.

The finding is significant, especially when programs such as the U.S. Department’s “Race to the Top” are directing more resources to charters deemed to be successful. The NEPC report presents new research on this question by Rutgers University Education Professor Bruce Baker, working with University of Colorado Boulder doctoral students Ken Libby and Kathryn Wiley. The research team examined spending in New York City, Ohio and Texas.

“Charter school finances are hard to measure,” says Baker. “Charters generally receive both public and private funds. Also, in-kind assistance and resources from districts and states to charters vary greatly. Yet we can see that the most successful charters, such as KIPP and the Achievement First schools, have substantially deeper pockets than nearby traditional schools.”

The report explains that most studies highlighting or documenting a successful charter school have sidestepped or downplayed cost implications while focusing on specific programs and strategies in those schools. The broad conclusion across these studies is that charter schools or traditional public schools can produce dramatic improvements to student outcomes in the short- and long-term by implementing “no excuses” strategies and perhaps wrap-around services.  Most charter school studies conclude that these strategies either come with potentially negligible costs, or that higher costs, if any, are worthwhile since they yield a substantial return.

But according to Spending by the Major Charter Management Organizations, a “marginal expense” may be larger than it sounds.   An additional $1,837 expense in Houston for a KIPP charter school, where the average middle school operating expenditure per pupil is $7,911, equals a 23 to 30 percent cost increase.

“A 30 percent increase in funding is a substantial increase by most people’s definition,” says Baker.

The study compares per-pupil spending of charter schools operated by CMOs to the spending in nearby district schools. The report’s authors examined three years of data, including information on school-level spending per pupil, school size, grade ranges and student populations served. For charter schools, the report’s authors drew spending data from government (and authorizer) reports as well as IRS non-profit financial filings (IRS 990s). Notably, the data from these two different sources matched only for New York City; the data reported for Texas and Ohio from the two sources varied considerably.

The study found many high-profile charter network schools to be outspending similar district schools in New York City and Texas. But it also found instances where charter network schools are spending less than similar district schools, particularly in Ohio. In Ohio, charters across the board spend less than district schools in the same city.

In contrast, KIPP, Achievement First and Uncommon Schools charter schools in New York City, spend substantially more ($2,000 to $4,300 per pupil) than similar district schools. Given that the average spending per pupil was around $12,000 to $14,000 citywide, a nearly $4,000 difference in spending amounts to an increase of some 30 percent.

Similarly, some charter chains in Texas, such as KIPP, spend substantially more per pupil than district schools in the same city and serving similar populations. In some Texas cities (and at the middle school level), these charters spend around 30 to 50 percent more based on state reported current expenditures. If the data from IRS filings are used, these charters are found to spend 50 to 100 percent more.

The National Education Policy Center (NEPC) at the University of Colorado Boulder produced Spending by the Major Charter Management Organizations: Comparing Charter School & Local Public District Financial Resources in New York, Ohio and Texas, with funding from the Albert Shanker Institute (http://www.shankerinstitute.org/) and from the Great Lakes Center for Education Research and Practice (http://www.greatlakescenter.org).

The report is available on the National Education Policy Center website at: http://nepc.colorado.edu/publication/spending-major-charter.

The mission of the National Education Policy Center is to produce and disseminate high-quality, peer-reviewed research to inform education policy discussions. We are guided by the belief that the democratic governance of public education is strengthened when policies are based on sound evidence. For more information on NEPC, please visit http://nepc.colorado.edu/

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Also see: "No Excuses! Really? Another look at our NEPC Charter Spending Figures.”School Finance 101, 5/7/2012 

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High turnover for New York City’s charter school principals

“High Turnover for Charter School Principals, Report Says.” SchoolBook, New York Times, 4/30/2012

By their own numbers, New York City charter schools have a tough time holding onto their principals, with nearly one in five of them heading for the door from one year to the next, according to a report released by a charter school advocacy group on Monday.

The New York City Charter School Center, a nonprofit group that supports charters, composed the report, which is a close-up look at the 136 charter schools that have sprung up across the five boroughs in the last 13 years. As the report notes, the schools still tend to be young — most have been open for four years or less...

Like previous studies by researchers at Stanford, the center’s report praises the city’s charters for their students’ positive results on the state math and English tests, which are taken annually by third through eighth graders. Last year, 69 percent of charter school students scored at the “proficient” level or higher in math, compared with 57 percent of students in traditional public schools. On the English exam, the charter school students came out ahead, but not by much.

Despite that academic success, there are staffing problems. About a third of teachers leave charter schools each year, which far exceeds the rate of 15 percent at district schools.

And in 2011, about 18 percent of charter school principals left their jobs, according to the report, which hypothesizes that the schools’ reliance on young teachers and “start-up mode” struggles wear out employees after a few years...

The center’s report also takes a critical look at the number of special education students and children who are not fluent English speakers who attend charter schools, figures that are significantly lower than in the district schools, as has been reported and pounded by critics.

Last year, about 6 percent of charter school students were English language learners, compared with 15 percent in traditional schools...

The charter school center has also organized the data by school, which can be found on its Web site.

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Better Research Needed on the Impact of Charter Schools

“Better Research Needed on the Impact of Charter Schools.” Science, 1/13/2012

View pdf of article @ http://sandera.ucsd.edu/news-and-events/Science-2012-Betts-171-2.pdf

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“Report: We still don’t know much about charter schools.” The Answer Sheet, The Washington Post, 1/14/2012

A new study on the effectiveness of public charter schools concludes that most of the research on the subject has been conducted with methods that “tell us little about causal effects.”

The study, just published in the journal Science, was conducted by two well-known researchers: Julian Betts, an educational economist at the University of California at San Diego and executive director of the San Diego Education Research Alliance, and Richard Atkinson, president emeritus of the University of California, former director of the National Science Foundation and professor emeritus of cognitive science and psychology at UC San Diego.

They wrote in their study, “Better Research Needed on the Impact of Charter Schools,” that charter schools have been embraced by the Obama administration — and by the George W. Bush and Clinton administrations before it — as “the saviors of a broken educational system.” But, they said, researchers still can’t answer the question: Does attendance at a charter school improve student outcomes?

“Which charter schools, or even types of charter schools, are more effective than others? We don’t really know,” they wrote.

Researchers (one of them was Betts) conducting a recent meta-analysis of charter research studies ended up throwing out about 75 percent of them because they didn’t take into account differences between the backgrounds and academic histories of students attending charter schools and those attending traditional public schools...

They argue that more lottery-based studies are needed as well as more longitudinal work, which means that researchers should be able to routinely access student data — and obtain lottery data from charter schools.

Until better research is done, policymakers simply won’t have the appropriate data to make decisions about which charters to replicate and which to shut down, Betts said in a university press release.

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KIPP - Knowledge is Power Program (student attrition)

STUDY FINDS HIGH DROPOUT RATES FOR BLACK MALES IN KIPP SCHOOLS; March 31, 2011; Education Week 

KIPP charter middle schools enroll a significantly higher proportion of African-American students than the local school districts they draw from, but 40 percent of the black males they enroll leave between grades 6 and 8, says a new nationwide study by researchers at Western Michigan University.

“The dropout rate for African-American males is really shocking,” said Gary J. Miron, a professor of evaluation, measurement, and research at Western Michigan University, in Kalamazoo, and the lead researcher for the study. “KIPP is doing a great job of educating students who persist, but not all who come.”…

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NATIONAL REPORT SAYS CHARTER SCHOOL HAS HIGH STUDENT ATTRITION; March 31, 2011; Baltimore Sun (MD)

A charter network that has two schools in Baltimore has a high level of student attrition and of private and public funding that have positioned it to be successful, according to a national report published Thursday.

The report on Knowledge is Power Program (KIPP), which opened its first school in Baltimore about a decade ago and recently reached a long-term deal to remain in the city for another 10 years, suggests that the national charter school network's high performance is a result of having advantages over its public school counterparts.

The study, which was published by Western Michigan University and jointly released with Columbia University, "What Makes KIPP Work: A study of student characteristics, attrition and school finance," based its conclusions on publicly available KIPP data measured against districtwide data…

Nationally, the report found, on average about 15 percent of students leave KIPP every year, compared with 3 percent in public schools. Moreover, between grades six and eight, about 30 percent of students drop off KIPP's rolls.

The majority of students who leave are African-American males, the report found, and the schools primarily serve African-American students.

The lead researcher, Gary Miron, called KIPP's attrition a "tremendous drop-off," concluding that he believes "their outcomes would change" without the attrition.

The study also concluded that KIPP's high performance, when compared to public schools, could be a result of serving significantly fewer special-education students and English language learners — two populations that are often less competitive academically and more expensive to educate…

The report's researchers found that in addition to receiving more public funding per pupil than its public school counterparts, KIPP also received $5,760 per pupil from private funding…

"Kids who persist at KIPP do well," Miron said. "But the question is, is KIPP lifting the public schools, or are they lifting the kids who have the support to persist?"

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