School Finance: Charter Schools

Reimbursement of Charter School Tuition

One of the many changes to charter school funding resulting from last summer's passage of Chapter 46 of the Acts of 1997 concerns the way in which the Commonwealth reimburses school districts for the tuition they pay to charter schools. This memorandum is intended to clarify the new reimbursement formula in order to assist school and municipal officials in their FY99 budget planning.

1. Reimbursement for Future Increases in Charter School Tuition (Chapter 46)

   The new formula for reimbursement of charter tuition provides three years of funding for any given year's tuition increase, regardless of a school district's Chapter 70 foundation status. Section 2 of Chapter 46 states that

   Beginning in fiscal year 1999, any district whose total charter school tuition amount is greater than its total charter school tuition amount for the previous year shall be reimbursed by the commonwealth in accordance with this paragraph and subject to appropriation; provided, however, that no funds for said reimbursements shall be deducted from funds distributed pursuant to chapter 70. The reimbursement amount shall be equal to 100 percent of the increase in the year in which the increase occurs; 60 percent of that amount in the first year following; and 40 percent of that amount in the second year following.

   The example on the next page shows how this staggered, three-year funding schedule would work for a hypothetical district's first two years of tuition increases. For a $50,000 increase in FY99 tuition, the district would receive $50,000 in FY99 reimbursement, $30,000 in FY2000, and $20,000 in FY2001. A $60,000 increase in tuition between FY99 and FY2000 would generate $60,000 in FY2000 reimbursement, $36,000 in FY2001, and $24,000 in FY2002.

   Example of Chapter 46 Tuition Reimbursements
   For Tuition Increases Occuring in FY99 and FY2000

   	A	B		C	D	E	F
   		Increase in		----Reimbursement----			Combined Ch 46
   	Total Charter	Charter Tuition		Year 1	Year 2	Year 3	Reimbursement
   FY	School Tuition	From Previous Year		@ 100%	@ 60%	@ 40%	(C + D + E)
   1998	300,000
   1999	350,000	50,000		50,000			50,000
   2000	410,000	60,000		60,000	30,000		90,000
   2001	410,000	0		0	36,000	20,000	56,000
   2002	410,000	0		0	0	24,000	24,000

2. Below-Foundation Chapter 70 Charter Aid

   The first Massachusetts charter schools opened in FY96. For the years FY96 through FY98 districts whose required net school spending amounts were below their Chapter 70 foundation budgets received 100 percent funding of each year's projected charter tuition increase as a component of their Chapter 70 aid. The combined amount of this aid is included in the "base aid" component of the Governor's preliminary FY99 Chapter 70 estimates published in February.

3. Chapter 267 Reimbursements to Above-Foundation Districts

   Since FY96, districts with required net school spending amounts in excess of their Chapter 70 foundation budgets have received partial reimbursement of their tuition each year. These reimbursements, authorized by Chapter 267, have been at 50 percent of annual charter tuition for pupils going to first-year charter schools, and 40 percent for those at second and third-year charter schools. Section 5 of Chapter 46 contains the following language that continues Chapter 267 through FY2000.

   Reimbursements made pursuant to section 19 of chapter 267 of the acts of 1995, as amended by sectoin 525 of chapter 151 of the acts of 1996, shall be limited to tuition charges for charter schools which began operation before July 1, 1998. Said reimbursements shall be based upon the tuition charge for said school in fiscal year 1998 or the tuition charge for said school in the year in which reimbursement is being made, whichever is less.

   In FY99, these above-foundation payments will augment Chapter 46 reimbursements, for pupils attending charter schools that began in FY97 or FY98. FY2000 will be the final year of eligibility under this law, and will only apply to three schools that began operation in FY98. After FY2000, Chapter 267 will not be in effect.

   Related Issues

   While the increase in FY99 tuition will not be known for individual districts until FY99, the Governor's FY99 budget proposal contains $20.3 million in what is expected to be full funding for this account. FY98 charter tuition currently stands at $43.1 million.

   School committee payments to Horace Mann charter schools are not eligible for reimbursement.

   Chapter 267 and Chapter 46 charter school reimbursements will be be paid as one combined item on the local aid distribution three times a year, in December, March and June.

   Districts should look at the enrollment information enclosed in this package to estimate the amount of tuition they will be charged in FY99. That tuition should should be anticipated as part of the municipality's or regional district's FY99 budget, and is eligible to be counted as net school spending. As is the case in FY98, and in accordance with section 10.06 of current school finance regulations, charter reimbursements will be considered school revenues, and subtracted from spending in determining net school spending compliance.

4. Further Information

   If you have questions or would like further information about the new reimbursement formula, please contact the Department's School Finance office at 781-338-6553.