Charter schools in California are publicly funded but function somewhat differently from traditional public schools. They operate independently under a performance agreement with a chartering authority, which is typically a school district but can also be a county office of education or the State Board of Education.

Because charter schools do not have to comply with most sections of the state Education Code, they are less regulated and have more independence in making decisions than traditional public schools. Instead they are governed primarily by their charters, which are generally granted for five years and renewed based on the school's performance.

Charter schools are funded on a per-pupil basis and are usually able to hire their own teachers and other staff. However, they are subject to closure if they fail to meet their promises regarding student outcomes or their obligations concerning financial management.

Also see the Legislative Analyst's Office report Comparing Funding for Charter Schools and Their School District Peers.

Funding for Operations

Each year charter schools can choose whether they want to receive their funding through their chartering agency or directly from the state. Either way, these schools receive revenues from both general purpose and categorical sources. See Budget & Funding.

General purpose funds, like the revenue limit monies districts receive, come from local property taxes and the state. The amount of general purpose funding depends on the school's estimated average daily attendance (ADA) and the grade level of the students, with the state providing more as students grow older. The amount is adjusted annually and is based on average district revenue limits.

Charter schools also receive a discretionary block grant that consolidates funding from about 45 categorical programs. In addition, charter schools receive extra funding for each student they serve who is identified as an English learner and/or eligible for free/reduced-price meals. Schools receive double funding for each pupil who is both an English learner and from a low-income family. This is in lieu of the state Economic Impact Aid that districts receive. Charter schools are able to treat these funds as general purpose monies and can spend them as they wish.

Many of the state's largest categorical programs, such as Class Size Reduction (CSR), are not included in the block grant. But charter schools are free to apply for CSR funding and for other categorical money from the state or the federal government as long as they meet applicable program requirements.

In addition, the federal government has earmarked funds for California charter schools under the Public Charter Schools Grant Program. Charter developers, new charter schools, and those charter schools with a history of success are eligible for grants.

Charter schools, like traditional schools, provide services and receive funding for Special Education students through a Special Education Local Plan Area (SELPA). It is legally presumed that a charter school is an arm of its charter-granting agency and thus a part of its SELPA. So charter schools have to negotiate with their charter-granting agency how costs, revenues, and responsibilities will be allocated.

The difference between categorical funding for charter schools and that received by traditional public schools is an ongoing policy issue for California. Charter schools end up getting less of the large categorical programs outside the categorical block grant. To bring about greater parity in the categorical funding for charters and noncharters and to compensate for the fact that some programs have been removed from the categorical block grant, the Legislature passed Assembly Bill (AB) 740 in 2005, which changes both the amount and calculation of the categorical block grant. This will be reviewed every three years.

Funding for Facilities

Locating and paying for facilities has proved challenging for many charter schools-especially start-ups. As a result, state and federal lawmakers have taken steps to ease the problem:

• As of November 2003, school districts must make adequate facilities available to charter schools of a certain size that are operating in the district.
• A portion of statewide school bonds are typically set aside for new construction of charter school facilities. To qualify for funding, a charter school must prove that it is financially sound.
• The Charter School Revolving Loan Fund allows a $250,000 maximum loan amount over the lifetime of a charter school, with repayment periods of up to five years. The charter schools are solely liable for these loans, and priority for loan applications goes to new charter schools.
• The Charter School Facility Grant Program (Senate Bill 740), passed in 2001, helps charter schools with rent or lease expenses. To be eligible, a charter school must have at least 70% of its pupils eligible for free/reduced-price meals or be located in an attendance area with the same kind of student population.
• The federal Credit Enhancement for Charter Schools Facilities program provides competitive grants to organizations that are willing to guarantee loans and leases that charter schools pursue.

For more about charter schools, see the Charter Schools issues page.