Charter schools’ academic, financial performance linked to governing board

 
charter school finances donor founder
Lawrence Family Development Charter School in Lawrence, Massachusetts, 2010. (Merrimack College/Flickr)
By

September 26, 2019

Massachusetts charter schools that give their donors a seat on their governing boards raise more money, take on less debt and have greater enrollment growth than those that don’t, recent research finds.

That’s not the case, though, when a charter school’s founder serves on its board. The school tends to borrow more heavily, manage its cash less efficiently and see smaller increases in enrollment compared with charter schools that don’t have a founder on the board, finds the paper, published in the Education Finance and Policy journal. But these schools do better in one critical area: Their students earn higher test scores.

Researchers also learned something about charter school boards that challenges assumptions about which kinds of board members will best help a charter school stay on track financially. While many Massachusetts charter schools have named financial experts such as accountants and investors to their governing boards, this study shows that the financial performance of charter schools with and without a financial expert on the board is about the same.

The study, according to its authors, is the first large-scale examination of the composition of charter school governing boards and their impact on performance. In the U.S., charter schools — independent public schools run by private organizations, community leaders and others — are described by advocates as being more innovative than regular public schools and offering families additional options in terms of teaching methods and academic topics. Critics, on the other hand, argue charter schools put a financial strain on school districts because they divert public money away from traditional public schools, sometimes prompting their closure.

Charter schools began to proliferate after President George W. Bush’s education-reform bill, the No Child Left Behind Act, was signed into law in early 2002. During his presidency, Bush invested more than $1.4 billion in creating and expanding charter schools as an alternative to families that did not want to send their children to struggling public schools in their neighborhoods.

Over the years, charter enrollment has swelled, from about 448,000 students attending 1,993 charter schools during the 2000-01 academic year to about 3 million kids at 7,011 charter schools in 2016-17, data from the National Center for Education Statistics (NCES) show. At the same time, hundreds of charter schools have closed or been shut down, often because of financial mismanagement and governance problems. Across the country, nearly 1,500 charter schools closed from 2010-11 to 2015-16, according to a 2019 report from the NCES.

It’s not yet clear whether students, generally speaking, do better at charter schools. Research shows mixed results when comparing the achievement of charter school students to those attending traditional public schools.

The recent study investigates the composition of charter schools’ governing boards and how it can affect their financial and academic success. Researchers looked at who sat on the board of directors for the 89 charter schools operating in Massachusetts from 2001 to 2013 and examined a variety of data related to school revenue and expenses as well as children’s test scores in math and language arts. In Massachusetts, there is no law mandating who can and cannot join the board of directors.

The two authors looked specifically at three types of board member: school founders, financial experts and donors. “Donor” members are those who typically play a key role at one of the corporate or nonprofit organizations that sponsor or donate money and other resources to the school. They tend to be employees, executives or members of the board of directors of these other organizations, explain the authors, Charisse A. Gulosino, an associate professor in the University of Memphis’ Leadership and Policy Studies Program, and Elif Şişli Ciamarra, an associate professor of business administration at Stonehill College.

Gulosino and Ciamarra find that having someone on the board who represents a donor increases the school’s financial performance in multiple ways. For example, these charter schools have higher funding surpluses, manage their cash more efficiently, rely less on debt and raise more money. The researchers attribute this to “the donors’ strong monitoring incentives because of their financial stakes in the school,” they write.

These charter schools also experience greater enrollment growth. According to their analysis, donor board members are associated with a 19.4% increase in the number of students enrolled each year, on average.

“We also documented that their impact does not take away from the academic outcomes,” Gulosino and Ciamarra said in a joint email response to questions from Journalist’s Resource. “These findings combined suggest that donors, having skin in the game, perform a monitoring function, possibly making sure that the financial resources are channeled in the right direction. Therefore, the strongest policy implication from our study is that charter schools will benefit [from] encouraging their donors to get involved in the management of the schools in meaningful ways, such as serving on their governing boards.“

Because having a charter school’s founder on its governing board is linked to higher student achievement in both math and language arts, founders also play a valuable role, the authors said.

In their paper, Gulosino and Ciamarra note that earlier research indicates founders, who are often experienced educators and social entrepreneurs, “often have their educational ideas firmly in mind, and possess the skills to successfully implement them.”

The authors point out that earlier research also suggests having founders on the governing board may hurt a charter school’s financial position. They “have the potential to configure boards and management that are less inclined to threaten their discretion, hence lowering the monitoring effectiveness of the board,” according to the new paper. “It has also been contended that founders may compromise the best interests of the organization to serve their own interests, such as preserving their own positions and lowering their likelihood of departure.”

Even so, Gulosino and Ciamarra recommend founders serve alongside donors.

“Our recommendation would be to complement their services on charter school boards with the services of donors in order to make sure that financials are also taken care of carefully,” they explained via email. “This is especially an important point to emphasize because almost all charter school closures in MA [Massachusetts] have been due to financial reasons, not due to academic reasons.”

The researchers cautioned against assuming their findings apply to charter schools in other parts of the country.

“We hope that our study encourages other researchers to conduct similar data-based analyses in other states,” they said.

Here are some of their study’s other key takeaways:

  • Having a financial expert on the board could hinder enrollment. The authors write that “enrollment growth is lower when a financial expert is present.”
  • A larger share of Massachusetts charter schools have named a financial expert to their boards. The proportion of boards with a financial expert member grew from 56.10% in 2001 to 75% in 2013.
  • The percentage of Massachusetts charter schools with at least one donor board member has dropped. In 2001, 65.85% of charter school boards had donor members. In 2013, 57.50% did.
  • The percentage of Massachusetts charter schools with a founder on the board fell substantially — from 90.24% in 2001 to 56.25% in 2013.
  • Charter school boards have shrunk a bit in size. In 2001, charter boards in Massachusetts had 11.73 members, on average. In 2013, the average size was 11.10 members.

 

Looking for more research on charter schools and other school choice programs? We’ve gathered research on why families choose virtual schools over traditional ones and whether government-funded vouchers that allow kids to attend private schools improve learning.

 

This image was obtained from the Flickr account of Merrimack College and is being used under a Creative Commons license. No changes were made.

 

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Citation: Gulosino, Charisse A.; Ciamarra, Elif Şişli. "Donors and Founders on Charter School Boards and Their Impact on Financial and Academic Outcomes," Education Finance and Policy, 2019.