Federal funding sources have played an important role in supporting the expansion of charter schools in California and other states. Other federal policies—such as the No Child Left Behind (NCLB) Act and the 2009 American Reinvestment and Recovery Act (ARRA)—also affect the way that charter schools fit into the public school landscape.

Federal funding sources

Three federal programs provide funding to charter schools. The Charter Schools Program (CSP) supports the expansion of successful charter school models. Two facilities programs-the State Charter School Facilities Incentives Program and the Credit Enhancement for Charter School Facilities Program-provide funds to help leverage aid for charter school facilities costs. California receives funding from all of these programs.

The largest of these programs is the CSP. According to the U.S. Department of Education (ED), CSP grant funds may be used for two main purposes: 1) planning and program design of the charter school educational program; and 2) initial implementation of the charter school. However, the ED has recently limited the scope of planning and program design for which CSP funds may be used.

California has received grant funding from the CSP since its inception in 1994. In June 2007, California received its most recent grant-almost $102 million to be used during three years. Grants are awarded on a per-school basis; and in 2007-08 alone, the state made one-time planning and implementation grants of between $250,000 and $600,000 to 65 charter schools. California will be eligible to apply for a new federal grant in 2010.

In fiscal year 2009, the federal government allocated $216 million in charter school grant funding. President Barack Obama's proposed fiscal year 2010 budget has requested $268 million for charter schools grants, which includes a facilities incentives grant of $12.7 million. This overall figure represents an increase of $52 million, 24% higher than 2009. During his campaign, Obama pledged to double funding for the CSP.

2009 American Reinvestment and Recovery Act (ARRA)

The ARRA, known as the 2009 federal stimulus, is expected to provide at least $8 billion for California schools, most of which will be used to backfill state cuts made because of California's budget crisis. Direct-funded charter schools are eligible to receive stimulus funding directly. Other schools are locally-funded charter schools, which receive their funding through their local school district.

In order to receive these federal funds, states must adhere to four "assurances." These include improving teacher quality, strengthening standards and assessments, enhancing data systems, and turning around low-performing schools. As part of their assurance to work to turn around low-performing schools, states must be able to report to the federal government: (1) whether they have a cap restricting the number of charter schools currently operating; and (2) the number of charters that have closed within the past three years for academic reasons. California law specifies a moving cap, which boosts the number of charter schools the state will allow by 100 each year even if no new charter schools have opened. In 2008-09, the state cap is 1,250 charter schools, and California had less than 800 charters that year.

The ARRA also introduces new sources of competitive grant funding that charter schools may be eligible to receive. The $650 million Innovation Fund will support successful models or programs that are making gains to close the achievement gap. The Teacher Incentive Fund (TIF) is a $200 million competitive grant program that supports the development and implementation of merit-based pay programs. Because many charter school teachers do not participate in collective bargaining-and might therefore be more receptive to the idea of merit-based pay-charter schools could be more likely to apply for these funds than traditional public schools.

Implications for charters in No Child Left Behind Act

Charter schools are required to adhere to the same federal accountability measures under the No Child Left Behind (NCLB) Act as traditional public schools. NCLB calls on the charter's authorizer to hold its charter school accountable for meeting adequate yearly progress (AYP) under the law.

NCLB also has several key provisions that affect charter schools specifically. First, parental choice is a key element of the law, and it allows for students attending failing schools to go to a different traditional school or charter school within their district. Second, if a school does not make AYP for six consecutive years, the district must implement one of five restructuring options, one of which is closing the school and reopening it as a charter school. (Charter schools must also make AYP.) Third, the law permits a charter school to provide supplemental services, such as tutoring to students, in schools that have not met AYP for three or more years. The school district must pay the charter for providing these services.