School & District Management

Chicago Mayor’s Plan for New Schools Hits Snag Over Finances

By Catherine Gewertz — October 26, 2004 6 min read

Chicago is courting private organizations to set up dozens of new small schools, but many groups interested in running them contend that the district’s financial offer is inadequate.

At meetings with top district administrators in recent weeks, representatives from private school-management companies, current local charter school operators, and nonprofit groups have expressed concern that the new schools might not get money equal to allotments for the city’s regular public schools.

The talks are unfolding as part of Mayor Richard M. Daley’s Renaissance 2010 plan, which will close about 60 of Chicago’s underenrolled or poorly performing schools—10 percent of the city’s schools—and reopen them within six years as 100 or more smaller schools. (“Chicago to ‘Start Over’ With 100 Small Schools,” July 14, 2004.)

Two-thirds of the new schools will be operated by outside groups, as charter or “contract” schools. One-third will be operated by the district, but with more freedom than regular schools to decide such matters as budget, curriculum, and staffing. The city hopes to encourage innovation that sparks school improvement, while offering more educational choices to families.

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The high-profile plan has caught the eye of a national audience interested in whether private-public partnerships and nontraditional school arrangements can boost achievement. It also unfolds as mayors increasingly are turning to charter schools as one improvement strategy. Mayor Daley has run Chicago’s 430,000-student system since 1995.

Those deeply involved in Renaissance 2010 are aware that the stakes are high because their city is deliberately casting itself as a laboratory for urban school reform.

“We want to make sure we can resolve these financial issues,” said David Weinberg, a co-founder and the chairman of the board of the Illinois Network of Charter Schools, an advocacy group. “We’ve made a big splash about this, and we have to make sure we can overdeliver.”

Parties Optimistic

More than 50 people or groups have submitted letters of intent to apply for the Chicago school board’s permission to run 18 schools in the fall of 2005.

They include for-profit national educational-management companies, local community groups, universities, and current operators of Chicago charter schools. They must submit full applications by Nov. 22, with a school board decision expected in late January.

In interviews with Education Week, potential school operators expressed strong optimism that the funding problems would be ironed out soon. They said district leaders appear committed to making revisions that ensure the new schools will have the resources they need.

But some said that the package on the table as of last week, if unchanged, would make opening new schools challenging at best.

“The numbers as currently configured would make it extraordinarily difficult,” said Ron Manderschied, the president of Noble Street Charter High School’s board, which would like to open another charter school. “We don’t want a dime more than any other average high school gets. We want to be treated fairly and not operate at a disadvantage.”

At the center of the discussion about money are whether the new charter-like schools will get a sufficient share of state and federal categorical funding, especially special education money, and whether they are being shortchanged by the city’s plan to deduct money from schools that open in district-owned buildings.

The district’s request for proposals from potential school operators offers them $5,500 per pupil in base funding for K-8 schools, and $6,500 for secondary schools. Those figures reflect the average, comparable per-pupil amount given to the district’s other schools, said Greg A. Richmond, the director of the district’s office of new-schools creation.

Because it is expensive to build new buildings, and finding appropriate existing facilities can be tough, the lion’s share of new schools is expected to open in existing district buildings. Many applicants have taken particular note of the district’s plan to deduct for maintenance and capital support $1,175 per pupil from K-8 schools and $1,425 from high schools that open in district-owned buildings.

The arrangement reflects the cost saved by the school operator in using a district facility where such services as janitorial and building repair are provided, Mr. Richmond said. But potential Renaissance 2010 school operators contend it amounts to a payment of rent that leaves them with less money than the city’s other schools.

“Regular [Chicago] schools don’t pay rent,” said Mr. Weinberg of the Illinois Network of Charter Schools. “Why all of a sudden would charters [and other Renaissance 2010 schools] pay rent?”

Losing Money?

Those contemplating new schools under the plan are also in discussions with the city to ensure a fair formula for the distribution of categorical money. Mr. Richmond said the talks have revealed, in particular, disparities in special education funding, with existing charter schools claiming they receive only one-quarter to one-half of what their noncharter counterparts receive.

“We don’t understand yet why that’s been happening,” he said.

The district is trying to unravel that problem in order to forge a funding formula for Renaissance 2010 schools that also can be applied uniformly to existing charter schools, he said.

Failure to work out such a formula could cast doubt over some schools’ expansion hopes.

Elizabeth M. Delaney Purvis, the executive director of the Chicago Charter School Foundation, which operates seven city campuses serving 4,700 children in grades K-12, said her schools lose money on special education services.

Last year, she said, the schools combined had to spend $600,000 beyond the $773,000 in special education funding they received. Without a revision in the funding, she said, “we can’t continue to open schools that could put our entire system in jeopardy.”

Many charter schools have raised millions of dollars to build facilities, or to support ongoing costs, but their leaders believe such fund-raising could be difficult on a larger scale. That increases the pressure to get the financial formula right, advocates say.

“This is the key moment of a school-starting initiative,” said John Ayers, the executive director of Leadership for Quality Education, a business-backed group that works to expand charter schools in Chicago. “These charters often fund-raise 10 to 15 percent of their budgets right now. But that’s going to get harder when there are more [charters or contract schools].”

Some large national school operators are waiting to see how the details pan out in Chicago before deciding whether to get into the mix. Others, such as Imagine Schools, are moving ahead even as they acknowledge the road is far from smooth.

“We are very, very interested, even though the jury is still out on funding levels, costs, and fees,” said Octavio Visiedo, the chairman of the board of the Arlington, Va.-based company that operates 70 schools in nine states and the District of Columbia and hopes to make its first foray into Chicago with three to five charter schools.

R. Eden Martin, the president of the Commercial Club of Chicago, a coalition of business leaders that is spearheading the raising of $50 million for Renaissance 2010 to help with schools’ start-up costs, said potential funders ask him often whether the schools will have sufficient autonomy and money. He believes they will.

“Any ambitious project will have questions raised,” he said. “[The district] has made a huge commitment. For all these questions, there are answers.”

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