Texas Charter Schools: The large ones get too much, the small ones too little


Laurence A. Toenjes*


Texas Charter school proponents, especially the Texas Charter School Association and the executive director of KIPP Inc., Houston, publicly maintain that there is a $1,000 funding “gap” between Texas’ open enrollment charter schools (Charters) and Texas’ traditional public school districts (TPSDs).[1]  Most of this alleged shortfall is an illusion.


In Texas, TPSDs and Charters vary widely in enrollments, percentage of economically disadvantaged students and other characteristics. Some of these differences result in the generation of additional state financial aid.  It has been customary, when comparing revenues between different TPSDs, to divide revenues to each district by a weighted student count.   The weighted student count, referred to as WADA in Texas, is intended to make comparisons between districts that have different proportions of more costly to education students more equitable. Other things being equal, districts with greater proportions of more costly students would receive higher WADAs.  This would cause reductions in such districts’ revenue per WADA, relative to districst that had fewer such extra cost students.  This avoids the situation where it appears that one district is unfairly receiving more revenue than another only because it serves more students with extra costs associated with them. It is intended to permit apples to apples comparisons.


Unfortunately, there is a problem in how WADA[2] is calculated for Charters in Texas, which makes comparisons of revenue per WADA between Charters and TPSDs invalid[3]. This problem is so severe that WADA should not be used as the divisor of revenue amounts when comparisons between Charters and TPSDs are made.  WADA does not represent the same thing for Charters as it does for TPSDs.  Therefore comparisons between the two, based on comparisons of revenues per WADA, are invalid. Dividing total Charters’ revenue by total WADA severely understates that ratio in comparison with total revenue per total WADA for TPSDs.


The problem of determining WADA for Charters is a direct consequence of how several statewide average parameters that are applied by the Texas Education Agency (TEA) in calculating state aid to Charters are determined. In addition to causing an understatement of Charters’ revenues, when expressed on a per WADA student basis, the entire process of funding Charters’ in Texas tends to give too little to the smaller Charters while giving too much to the larger ones. This was even pointed out by expert witnesses hired by the Texas Charter School Association (TCSA).[4]


In their brief filed with the Texas Supreme Court on April 14, 2015, in which they appeal the ruling of Judge Dietz in the 200th Judicial District Court, Travis County, Texas, the TCSA, through their attorneys, expressed concern primarily about the alleged $1,000 funding gap. But their brief also complains that not all Charters are being equitably funded.


“Charter schools receive funding based on state-wide averages.  School district funding, on the other hand, is adjusted to account for a district’s size, sparsity and cost of education.”[5]


 The same complaint is repeated in Appendix 5 of their brief:


“Each charter school receives the same Adjusted Allotment—the Statewide Average of the Adjusted Allotments for each ISD, regardless of its size, sparsity or cost of education.”[6]


At least five factors are applied to the determination of Charters’ state aid that are based on the averages of the values of the corresponding concepts that are calculated individually for each TPSD. The most important of these is the Adjusted Allotment (AA), the focus of the TCSA’s complaint quoted previously.


This is a legitimate issue.  The Adjusted Allotments are calculated for each of the individual TPSDs. They in fact reflect the values of district size, sparsity, and cost of education. The average[7] of these is then used in funding Charters, with the same average amount applied to all of them, as claimed.


The portion of the law, which guides the TEA in this process, is contained in Title 2 Subtitle C Chapter 12 Section 12.106(a-1)[8]. It reads as follows:


“In determining funding for an open-enrollment charter school under Subsection (a), adjustments under Sections 42.102, 42.103 ,42.104, and 42.105 are based on the average adjustment for the state.”


Turning to Section 42, Section 42.102[9] deals only with the cost of education adjustment. The manner in which this adjustment to the basic allotment is determined for TPSDs does not depend on size or sparsity.  It would therefore be reasonable to assume that the result of averaging the cost of education adjustment factors for all TPSDs would be applied to all Charters, regardless of size or sparsity.


Section 42.103 deals with small and mid-size district adjustments. It prescribes how each TPSD’s size and sparsity measures are to be used in further adjusting the basic allotment that was modified by the cost of education in Section 42.102.  In this section the resulting adjustment of the basic allotment determined under the previous section, Section 41.102, is defined as the “ABA”, for the adjusted basic allotment. This section, Section 42.103, then describes how the ABA should be further adjusted, which transforms it into the “adjusted allotment per student”, which is designated as “AA”.


This is where it gets interesting. Recall that the language in Chapter 12 Section 12.106(a-1) states that  …adjustments under Sections 42.102, 42.103, 42,104, and 42.105 are based on the average adjustment for the state.”


The Charters complain that the single statewide average applied to them does not reflect their individual values of “size, sparsity or cost of education.”[10]


The question is whether “the average adjustment for the state” applies to each of these sections in turn, or only applies to the end result for them all.


The instructions in Section 42.103 apply three different formulas for transforming the ABA into the AA for TPSDs, depending upon whether a district (a) has less than or equal to 1600 students in regular ADA and also has a geographic area of less than 300 square miles; (b) has less than or equal to 1600 students in regular ADA and has a geographic area of 300 square miles or more; or (c) has less than 5,000 students in regular ADA and offers all grade levels from kindergarten through grade 12.[11]


If the “average adjustment for the state” applied only to the final result then the reference to the various sections individually would not be necessary.


The criteria in conditions (a) – (c) divide TPSDs into three groups.  A fourth and very important group consists of those with regular ADAs greater than 5,000 students.


Charters do not have clearly defined boundaries.  It is therefore not possible to apply the same measure of sparsity to Charters as to TPSDs.  Consequently, in what follows only the small district adjustment formula for TPSDs with areas less than 300 square miles will be used in determining groupings for Charters and for performing separate averages of adjusted allotments (AAs) for TPSDs. This eliminates group (b) above.



After the adjustments under each of the formulas for which a TPSD meets the criteria are calculated, the adjustment giving the largest AA is then applied. The reason a “choice” is offered is because a TPSD with, say 1590 students would receive a larger adjustment under the formula that applies to any district with fewer than 5000 students in regular ADA than under one of those that applies only to districts with less than 1600 students in regular ADA. However, the transition point can be mathematically calculated. Figure 1 demonstrates the cutoff point where the small district adjustment formula (for districts with area less than 300 square miles) intersects the mid-size district adjustment formula.


Since districts receive the greater benefit of being adjusted with either of these, districts with a regular ADA of less than 1600 but greater than 1222 would have their adjusted allotment determined with the mid-size district adjustment formula, as shown.


The major point is that statewide average adjustments to TPSDs within the three different regions determined by size can unambiguously be calculated by determining in advance which region a district should be placed in for maximum benefit. The averages within each region can then be applied to all of the Charters that fall within each region, based on their numbers of regular ADA students.


Figure 1


The Small and Mid-size District Adjustment Formulas and the Regular ADA Value at Their Point of Intersection





One point that is not at all ambiguous in applying Section 42.103 is whether a TPSD is eligible for the adjustment under this section.  If the TPSD has 5000 or more students in regular ADA it does not qualify for an adjustment under Section 42.103.  Inasmuch as Chapter 12 Section 12.106(a-1) makes specific reference to Section 42.103, and this section is applied to TPSDs based on their size and sparsity, it would seem

logical that the averages for each subgroup of TPSDs would be applied to Charters depending on which of the groups they fall into.


The legal issue is whether Chapter 12 Section 12.106(a-1), should be applied separately to the subgroups to which Section 42.103 applies in the case of TPSDs, or whether the manner in which it has been applied by TEA, which does not recognize the distinction among the subgroups of TPSDs as well as Charters, is correct.


The practical issue is best described with the aid of Figures 2 and 3. Both figures show the values of the adjusted allotments for TPSDs and for Charters for school year 2014-2015. The values for the AAs are plotted on the vertical axis.  The values for their numbers of students in regular ADA are plotted on the horizontal axis.  Actually, the values plotted on the horizontal axis are the logarithms of regular ADA amounts.  Not using the logarithms would result in a diagram where the hundreds of very small districts would be indistinguishably bunched up at the left hand end if the scale were made large enough to include the very largest school district, Houston ISD, at the right.  Note that certain values are identified in normal terms: 1000, 1600, 5000, and 50,000 for reference.


In Figure 2 the AAs for all charters fall on the line representing a value of $6,265.  This was the statewide average adjusted allotment for all TPSDs for that year that was applied by TEA to all Charters.  If the TCSA’s complaint (above) was honored, and size was taken into account, Charters with regular ADAs in excess of 5,000 would not receive any benefit from adjustments made under Section 42.103.  Instead of having AA values of $6,265 they would fall somewhat lower, say at the level where Houston ISD is located.  To draw this contrast, Houston ISD and KIPP Inc Houston are identified in Figure 2. KIPP Inc had an AA of $6,265, whereas Houston ISD’s was just $5,460, $805 less. This makes a difference of at least $17,710 for every classroom of 22 students.[12]  Note that both had regular ADAs exceeding 5000 so neither would be eligible for an adjustment under Section 42.103. Consequently, there is no reason why KIPP Inc’s AA should be greater than that for Houston ISD.


Figure 2



It was attempted to determine how Charters would be affected if the average AAs were calculated separately for each of the size categories. The average adjusted allotments were determined separately for small TPSDs, for mid-zed TPSDs, and for those with regular ADAs exceeding 5,000 students. The resulting three average adjusted allotments are shown in Table 1[13].


Table 1


Numbers of Districts and Charters in Small, Medium and Large Categories

Total ADA and Average Adjusted Allotments



Traditional School Districts




(regular ADA)

Nbr of






Nbr of




0 to 1222






1222 to 5000






Greater than













Data source:  Basic data for each TPSD obtained from the Texas Education  Agency.

Calculations of adjusted allotments (AA) made by the author.


The different values for the adjusted allotments (AA) are represented by the three horizontal red lines in Figure 3, each of which extends over the relevant range of regular ADA.


It is argued, based on Figure 3, that there is more coherence between the values of the adjusted allotments for Charters, indicated by the relationship between the red lines and the actual values of AAs assigned to TPSDs. For example, currently, all mid-size and large Charters are assigned values for their adjusted allotments that exceed those actually calculated for all TPSDs with regular ADAs greater than 1600 students. If the alternative AAs were used instead—$5587 for the mid-sized Charters and $5417 for those greater than 5000 in regular ADA students—there would be some TPSDs above and some below those values in both of these size ranges, as can be observed in Figure 3.  That would seem to correspond more closely to how the use of “average” values would normally operate—some would be above, some below.


The only reason why the AAs of all mid-sized and large Charters presently exceed the AAs of all TPSDs in these size ranges is because the current method of determining the statewide average of the adjusted allotments assigned to Charters permits the very large benefits of the small district adjustment to influence the AAs that are assigned to Charters in the larger size categories.  This seems to violate the provision of Section 42.103 that explicitly restricts the influence of the scale adjustments for TPSDs with regular ADAs of less than 5000 students from influencing the adjusted allotments of TPSDs which are greater than that.  Similarly, the effect of the scale adjustments for TPSDs that have regular ADAs of less than 1222 students are not permitted to influence the adjusted


Figure 3


Districts and Charters shown at levels of the adjusted allotments for school year 2014-2015 with alternative values of Charters’ adjusted allotments shown as red lines




allotments of TPSDs which are larger.  It seems logical that in applying Chapter 12 Section 12.106(a-1), which explicitly references Section 42.103, that these same conditions should be applied. Doing so would alleviate the problems described in Toenjes (2015) (see footnote 2). In addition, the changes suggested here would at least partially address the complaints of the Charter school proponents quoted above, since the effect of Charter size upon adjusted allotments would be determined separately for small, medium and large size Charters. The small Charters would receive more state aid, the larger ones less.




Under current law and practice, small Texas open-enrollment charter schools receive too little state aid, while the larger ones receive too much. This condition is at least in part a result of the manner in which the school code—Chapter 12 Section 12.106(a-1)-- is currently being interpreted.  This interpretation should be reexamined.


* Laurence A. Toenjes retired from the University of Houston, Department of Sociology, in 2002.  Dr. Toenjes was involved with issues in school finance in Texas, Illinois, Missouri, and Nebraska during the years 1983 to 2002.  Prior to that he worked for the Bureau of the Budget and the State Comptroller in Illinois. He received a doctorate in economics from Southern Illinois University, Carbondale, Illinois, in 1973.

[1] David Dunn and Mike Feinberg, “Charter School Inequality,” published on the Houston Chronicle website on February 3, 2014.  Dunn is the executive director of the Texas Charter School Association, Feinberg is one of the founders of the KIPP system of public charter schools and is the executive vice chairman of KIPP Inc Houston. See http://www.chron.com/opinion/outlook/article/Charter-school-inequality-5201173.php


[2] “WADA” is the abbreviation of weighted students in average daily attendance. The WADA amount for a given TPSD or Charter will be greater than ADA depending upon the proportions of extra-cost students who are enrolled.  WADA amounts will also be greater if the adjusted allotments (AAs) are increased or in some sense “too high”.  This could occur, for example, if the effects of the small district adjustments are permitted to influence the AAs assigned to Charters that are not small. In this case, not only would WADA be “too high”, but the actual entitlement amounts of state aid would also be inflated.  However, if both revenues and WADA are overstated, revenues per WADA, when compared to Charters or districts not receiving the same advantaged, could actually appear to be less.  See Toenjes (2015) for an elaboration of this argument.


[3] The invalid WADA for charter schools is a function of the manner in which the statewide adjusted allotment, applied to charters, is calculated.  This bias is described in Toenjes, “Texas Charter School Funding Inflated by Overly Generous Adjusted Allotment”, available on this web page.


[4] R. Anthony Rolle, R. Craig Wood, “When What You Know Ain’t Necessarily So:  A Comparative Analysis of Texas Foundation School Program Revenues for Independent and Charter School Districts,” Educational Considerations,  v39 n2 p20-29 Spr 2012.  In this article is found the following (p. 27):


For CSDs [Charters] the FSP mechanisms generate revenues based on an average adjusted allotment—a value that is ubiquitous to all CSDs.  Specifically, this average adjusted allotment is applied to all individual CSDs regardless of school size, level of sparsity among students living in the district, and cost of education differentials that vary by charter school district.  The direct result of this averaging is a failure to alleviate negative—or reward positive—community characteristics.”


The authors then add:  “As a result school districts with differential school climates, i.e. those CSDs that are not represented well by the average are being underfunded (or overfunded) by the state. [emphasis added]


[5] Brief of Texas Charter Schools Association, et al, filed in the Supreme Court of Texas, April 4, 2015, Case No. 14-0776. Brief may be found at  https://www.txcharterschools.org/wp-content/uploads/2015/04/TCSA_Op_Brief.pdf


[6] Brief of Texas Charter Schools Association, Appendix 5.


[7] The “average” used by TEA is the arithmetic mean of all of the values of the adjusted allotments that are calculated individually for each regular school district.  This average is skewed upwards due to the hundreds of small districts that receive the substantial effect of the small district adjustment even though, collectively, they included a mere four percent of all students in the state. A weighted average of the adjusted allotments, using districts’ total ADA as the weighting variable, would eliminate the problem of overstating Charters’ WADA, thereby making comparisons between Charters and TPSDs more meaningful.  Of course it would also decrease the total amount of state funds going to Charters, and would not address the issue being addressed here, namely the relative underfunding of small Charters as compared to the larger Charters.


[8] Title 2 Subtitle C Chapter 12 Section 12.106(a-1) may be found at: http://www.statutes.legis.state.tx.us/Docs/ED/htm/ED.12.htm


[9] Sections 42.102, 42.103 ,42.104, and 42.105 may be found at:   http://www.statutes.legis.state.tx.us/Docs/ED/htm/ED.42.htm


[10] TCSA Brief, Appendix 5.


[11] Conditions (a), (b), and (c) define three groupings or classes of TPSDs.  A fourth group consists of those with regular ADA in excess of 5000. It is argued further on that group (b) would be impossible to define for Charters inasmuch as they do not have established geographic boundaries. 


[12] To determine the precise impact of a change in the adjusted allotment of $805 it is necessary to evaluate the impact taking into account all of the features of Texas’ school finance formula.  Assuming a per pupil impact of $805 for Houston ISD, however, is likely a lower bound.  The AA multiplies all student counts, regular students as well as those that carry extra weights, effectively increasing the value of the weights.  In addition, an increase in Tier I allotments as a result of the greater AA would result in a greater WADA amount, and since WADA is the student count used in funding the enrichment tier, the entitlement for that tier would increase as well.


[13] If the “small and sparse” districts are excluded, the average adjusted allotment for the smallest size group shown in Table 1 would decrease from $6,712 to $6,541 and that in the mid-size group would decrease from $5,587 to $5,574. The largest size group, those with regular ADAs over 5,000, would not be affected.


[14] The statewide average adjusted allotment actually used by TEA for school year 2014-2015 was $6,265. The one shown in Table 1 above, $6,263 is based on the data received from TEA that was used by that agency in calculating the Summary of Finances reports as of Feb. 10, 2015.  That data, for the 1,019 TPSDs retained in the sample, was then used in calculating state aid payments, which included the determination of the adjusted allotments. Several special districts were excluded.