Chapter 19.10


What Impact do Charter School Tuition Costs have on Property Taxes?

This week, we have covered one of the three major areas of expenditure growth for school districts--charter school tuition. We've covered topics such as the number of students attending charter schools, how charter schools are funded, how tuition rates are calculated and why costs have grown.
So, what impact do charter school tuition costs have on local property taxes? To answer this question, we first must review some of the data points we covered earlier. Each year, school districts must adopt a budget for the upcoming school year and anticipate available revenues and expenditures. Part of that budget includes property taxes, which is the revenue source many school districts must rely on to meet growing mandated expenditures. 
As covered during our review of property taxes last month, school districts vary in the degree to which their budgets are funded by local property taxes--this is their property tax ratio. Furthermore, Act 1 provides for restrictions on local property tax increases, and when combined with its property tax ratio, measures a school district's board authority (Act 1 Index multiplied by the school district's property tax ratio). The concept of board authority represents the degree to which a school district can cover an increase in total operating expenditures through a property tax increase at the Act 1 index. While most school districts frequently do not have to raise local property taxes to the maximum, board authority does provide a measure of local capacity.
Returning to charter school tuition costs, if we look at the average annual change in charter school tuition costs for each school district and compare it to the school district's board authority, we gain insight into the degree to which charter school tuition costs impact local property taxes in that district.

For example, the average annual percentage change in charter school tuition costs of all school districts is 6.21%. This change represents 0.106% relative to their total budget. The statewide median board authority for 2019-20 is 1.168%--meaning that they have the capacity to raise additional revenue equal to 1.168% of their total budget to cover any mandated cost increases and other areas of budgetary growth. Examining the median ratio of all school districts between change in charter school tuition costs and board authority, in 2019-20, school district will likely use up at least 10% of their total board authority (ability to generate additional revenue by raising property taxes to the Act 1 index) just to cover growth in charter school tuition costs. 

Click on the image link below to view our interactive map illustrating for each school district average annual % change in charter school tuition costs, board authority, and the relative impact of growth in tuition costs on property taxes.