Can you throw money at the problem of charter school growth? We might find out.

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President Trump’s federal budget calls for over $150 million in increased spending on charter schools.

Florida’s House of Representatives just passed a “Schools of Hope” bill that would provide $200 million to non-profit charters that opened schools in neighborhoods with high concentrations of “D” and “F” schools (the Senate has note yet voted).

Given that the rate of new school openings has dropped over the past few years, these new funds, if approved, could stimulate the pace of growth of charter schools.

Some reflections:

Will Florida funds increase growth or shift growth?

It’s unclear whether the Florida funds would increase charter growth or simply shift growth away from other states towards Florida.

My guess is that it will increase growth for two reasons: (1) it’s hard to grow across state lines so I doubt out of state operators could absorb the full $200 million and (2) if the for-profit world is any indication, other states will follow Florida’s lead to compete for great charter schools, which ultimately will create a greater pool of growth funds across the country, which should stimulate new entrepreneurs as well as provide funds for operators to grow in their home states.

How much does money incentive growth in the non-profit sector?

For management teams, growth is much less lucrative in the non-profit sector than it is in the for-profit sector. Salaries go up a bit, but not 50-100X, and there is no cashing out of equity.

There may be some status associated with winning big grants and growing, but the lack of financial incentives to individuals is probably a big barrier to successfully throwing money at the problem.

How much does money change the emotional incentives of charter entrepreneurship?

Perhaps money will have a positive causal effect through non-financial channels by changing the emotional incentives of charter entrepreneurship.

It takes a special kind of person to open a charter school when the local district, the local teacher’s union, and half your friends are telling you charter schools are destroying public education.

But what if the federal government and (eventually) dozens of states were offering large amounts of public dollars for you to open a charter school?

When the President, the Governor, and the Mayor are all asking you to grow – and putting their money up – perhaps this changes your emotional inclinations?

How much does money lower the headaches of growth?

Perhaps incentives should be thought less in terms of accusing gains and instead in avoiding pain.

Ask a charter operator what the biggest headache is for growth and facilities will inevitably be near the top of the list.

To the extent additional funds can be used (or allow other money to be used) for down payments on facilities, these funds might help stimulate growth.

My Guess

I think a state package of (1) multiple state authorized charters and (2) money for buildings would have a positive impact on growth.

Local school board authorization and lack of facility funds are huge headaches for even the most sophisticated charter organizations.

Removing these barriers would be a positive step forward.

However, I do worry that the process of lowering barriers, increasing funds, and scaling great operators will not meet the demands of the political cycle.

As this Politico piece notes, it’s unlikely that the nation’s best operators are going to immediately scale in Florida.

My recommendation to Florida would be to mimic the growth of the federal charter school program: start small, spend the funds prudently, and the increase the amount of funding available as operator capacity to growth increases.

In other words, fight for 25 years of 10% growth, not a 2-3 year moonshot.

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