Too Good To Refuse?

A closer look at PSP's $35 million offer to the School District of Philadelphia.

Yesterday, the Philadelphia School Partnership made what seemed, at first blush anyway, like an offer too good for the School District to refuse: $35 million, in exchange for the authorization of enough new charter schools to educate at least 11,000 kids.

“We are trying to make it cost-neutral for the district, so they consider the applications on their own merits,” PSP Executive Director Mark Gleason told the Inquirer’s indefatigable Kristen Graham. The donation was supposed to “take the cost issue off the table.”

The “cost issue,” if you haven’t been following closely, is the big financial hit the district takes every time a kid enrolls in a Philadelphia charter school. Charter enrollment growth is one of the biggest single reasons the district is in such extreme financial distress, which is why the School Reform Commission hasn’t granted permission for a new charter school to open in seven years.

Now, though, the SRC is weighing applications for 39 new charter schools, and the board is under intense political pressure to approve at least some of those applications, in spite of the financial problems that charter growth creates.

That’s what made PSP’s surprising offer such big news. If indeed the cash was enough to “take the cost issue off the table,” the SRC seemed sure to approve at least those applications from proven charter operators (operators like Mastery, Independence, String Theory, MaST, etc.).

But it’s not quite that simple. To wit:

  • PSP estimates that the district loses about $2,000 every time a student enrolls at a charter school. The district, meanwhile, has been estimating its per-student charter costs as $7,000. That’s quite a delta. The district’s estimate may be wrong, but if not, a $2,000 coupon off a $7,000 expense falls well short of taking the cost issue “off the table.”
  • Just as critically, PSP is offering to cover the cost to the district only in the first year a student enrolls at a charter school. That wasn’t entirely clear yesterday, when many had the impression that PSP was offering to make the district whole for the first three years after new charter schools were approved. The costs to the district when charter enrollment grows extend beyond a single year because of the many challenges involved in shedding those costs (closing schools, for instance). The district sometimes refers to those expenses as “stranded costs.”
  • What, exactly, the stranded costs would be for 11,000 new charter students over three years isn’t entirely clear, but it’s sure to be much, much larger than what PSP was offering.
  • This is a smaller matter, but PSP calculations released yesterday included a $1.5 million typo. Those estimates have been revised, and PSP now says that the cost to reimburse the district for its first year costs for 11,000 new charter students is $21.8 million, not the $20.3 million PSP estimated yesterday.

“Our board, our funders, are saying we don’t want district students to get hurt and this is what we can offer to deal with this transition. We understand the argument that those costs linger for over a year,” said Kristen Forbriger director of public affairs for PSP (full disclosure: Forbriger is also a Citified insider).

So what happens next? “I assume we’re going to have some sort of discussion about stranded cost. We’re going to explain how we get to our $2,000 estimate, we’re going to ask the district how they get to $7,000,” Forbriger said.

It doesn’t sound like any more money might be on the table, but Forbriger suggested that PSP’s request for 11,000 new charter students could be negotiable. If the district can show that it really does cost the district $7,000 when kids enroll in charter schools, PSP might accept fewer new charter schools in exchange for the $35 million it is offering.

What will the SRC do? How will PSP’s offer change the board’s thinking? We should find out next week.