Pa. cyber charters show ‘excessive profiteering,’ amassing millions in assets, new report says

Pennsylvania’s four largest cyber charter schools, which enroll almost 75% of cyber charter students statewide, have been amassing hundreds of millions in assets, while school districts that fund them continue to raise taxes, a new report shows.

The massive growth in net assets — from $566,000 in 2018, to $486 million in 2022 — demonstrates ”excessive profiteering” by cyber charters at school districts’ expense, according to the report by Education Voters PA, a pro-public-education advocacy group. Pennsylvania’s 13 cyber charter schools receive about $1 billion a year from school districts.

At least one cyber charter, Commonwealth Charter Academy, has been increasingly buying property — with 29 properties purchased statewide since 2018, according to the report.

“Cyber charter schools are awash in funding that is excess, that is in plain sight,” said Susan Spicka, Education Voters’ director.

Charter advocates pushed back. The growth in assets “reflects sound financial management and reinvestment in educational infrastructure and resources,” said Anne Clark, CEO of the Pennsylvania Coalition of Public Charter Schools. “We believe that it is essential for charter schools to maintain adequate levels of fund balances to mitigate risks.”

Tim Eller, senior vice president of outreach and government relations for Commonwealth Charter Academy, said in a statement that “every penny that CCA receives is used to provide a high-quality education and support services to each and every enrolled student.” Like traditional public schools, the charter’s assets include buildings, technology, infrastructure, equipment, and a learning management system, Eller said.

Here’s what the report found, and how it ties into efforts to change how Pennsylvania’s cyber charter schools are funded.

Tax filings show that net assets, or the difference between a school’s total assets and its liabilities, soared at the four examined schools, which also include Agora Cyber Charter, Pennsylvania Cyber Charter and Reach Cyber Charter, the report said. It called the growth “staggering.”

The four schools have been taking in significantly more revenue than they’re spending each year. The largest of the four, Commonwealth Charter Academy, which enrolls more than 20,000 students — more than double its enrollment prior to the pandemic — took in $397 million in total revenue in 2022, according to its 990 tax form, but only spent $274 million.

Commonwealth Charter reported net assets of $305 million in 2022; in 2018, it had just $3 million.

If traditional public schools filed 990 forms, they too would report significant assets, Eller said. But he didn’t address the widening gap between the school’s revenues and expenses, and whether it had more money than it needed.

A significant share of Commonwealth Charter’s assets are land. The school reported a net value of $173.5 million for land, buildings and equipment in 2022.

An inventory of properties owned by the school indicates it’s developing a “real estate empire” across Pennsylvania, the report said, “funded by property taxes paid by homeowners in school districts that cannot afford to fix and maintain their own buildings.”

Since 2018, Commonwealth Charter has purchased 29 properties, the report said, used for “everything from family service centers to office buildings, miscellaneous commercial services, and parking lots.” In total, it found the charter owns 35 properties, which it spent $88 million to purchase, and leases nine others.

The findings raise questions about “what the purpose is of the properties CCA is purchasing ... and what benefits these have for students,” Spicka said, whose group didn’t analyze property acquisitions by other cyber charters.

She also said that if CCA were to sell the properties, “nothing requires that any proceeds” be returned to taxpayers.

Eller said the properties “serve a variety of purposes, including work locations for staff; student state testing sites; student and family meetings with teachers, counselors, and administrators; student field trips; career and post-graduation planning; and enrollment as well as being open to members of the community for events and meetings for their local groups.” He didn’t answer a question about whether CCA would be required to return proceeds to taxpayers if it sold any buildings.

From responses to Right-to-Know requests, Education Voters also identified $21 million in spending by cyber charters in 2022-23 on advertising and gift cards — what the report described as “additional evidence of excess funding and waste.”

Commonwealth Charter, for instance, paid advertising agencies more than $1.1 million in 2022-23, while Reach Cyber Charter spent close to $1 million on grocery and Target gift cards, according to the report. It also found cyber charters spent close to $38,000 promoting minor-league sports teams.

Cyber charters say they have to spend money on advertising to ensure that students have access. “Students and families have a right to know what education options are available to them and advertising ensures that they receive that message,” Eller said.

“It’s kind of staggering to look at the volume of dollars that are being spent on this, especially when we know school districts around the state ... are now raising property taxes and making cuts,” Spicka said.

The report comes as Democrats and public school advocates have continued to push for funding changes to cyber charters, which are paid by school districts — and therefore, taxpayers — based on what the districts spend per student.

Cyber charters are paid at the same level as brick-and-mortar charters — an arrangement critics have long called excessive. But the rates can vary significantly: Because school districts spend widely different amounts, in part due to Pennsylvania’s heavy reliance on property taxes to fund education, cyber charters receive different payments depending on where students live.

Gov. Josh Shapiro has proposed setting a flat cyber charter payment rate of $8,000 per pupil — compared to the $8,639 to $26,564 the charters currently draw. Cyber charter advocates say any cuts will hurt their students, and Republicans in Harrisburg have rejected past proposals to set a flat rate.

But lawmakers of both parties serving on an education funding commission recently agreed that school districts should receive some reimbursement for students enrolled in cyber charters — signaling some recognition of the cost to districts.

In addition to reducing cyber charter payments, the state should conduct forensic audits of cyber charters, Spicka said, describing inconsistencies her group uncovered. For instance, she said, Commonwealth Charter Academy didn’t report any spending on advertising in certain years on federal tax forms, but provided invoices for those expenses in response to right-to-know requests.

While “we’re not accusing current cyber charters of malfeasance or criminality,” Spicka said, Pennsylvania has had a history of cyber charter scandals, including founders siphoning money from the schools.

She also called for a moratorium on new cyber charter schools, noting that many schools are operating under expired charters. “It is wildly irresponsible for our state government to approve new cyber charter schools when it is unable to ensure accountability for the existing” schools under the charter renewal process, Spicka said.