By Ray Carter
When news broke that the Oklahoma State Bureau of Investigation had filed a search warrant accusing Epic Charter Schools of receiving state funding for “ghost students” who did not attend school through the online provider and, in one case, had even left the state the prior year, it understandably drew concern from all quarters.
But as that investigation proceeds, it has indirectly highlighted a less well-known fact: Many traditional public schools, all across Oklahoma, are receiving funding to educate similar “ghost students” who no longer attend those schools. And, for those schools, the payments are not only legal, but the result of deliberate design.
Oklahoma law requires that state school funding be distributed based on several factors, including “the highest weighted average daily membership for the school district of the two (2) preceding school years.”
The use of the highest average daily membership (ADM) figure from prior years guarantees that many schools, particularly those with declining enrollment, receive continued funding for students who have transferred to other districts, graduated, or even moved out of state.
“Those are ‘ghost students’ that they are getting paid for,” said Sen. Gary Stanislawski, a Tulsa Republican who chairs the Senate Education Committee, “and they will fight, fight to the death, to maintain those.”
“There are definitely districts across the state that are being paid for students that are no longer there,” said Rep. Chad Caldwell, an Enid Republican who served on a task force that examined the state’s school-funding formula.
Byron Schlomach, director of the 1889 Institute, an education and research organization, has also examined Oklahoma’s school-funding formula.
Given that some families move multiple times in a year, and may change school districts with each move, is it possible one child may be counted as part of the ADM figure at more than one school at the same time?
“Oh yeah,” Schlomach said. “Easily.”
And because Oklahoma’s school-funding formula provides “weights” based on a student’s grade-level and demographics, the financial gain to schools when some students leave can be even higher than what occurs when other students move.
For example, in a paper he wrote about Oklahoma’s school-funding formula, Schlomach noted, “On a grade-level basis under Oklahoma’s system, a fourth, fifth, or sixth grader is counted as a single student. Students at every other grade level are counted as slightly more than a single student.”
As a result, if a student in the first grade moves out of a district, the financial benefit of the retained “ghost” funding for that student is greater to the district than what would occur if a fourth grader moved away.
Meanwhile, the student who moved to another district may be counted in the new district’s average daily membership while simultaneously being counted in the ADM for the child’s prior district.
Other states that have employed similar funding systems have shifted to using current-year student counts due in part to the ghost-student problem.
In a summary of education reform measures enacted at that time in Indiana, the 2012 edition of the American Legislative Exchange Council’s “Report Card on Education” noted Indiana lawmakers had ended the use of a student-count system similar to that now used in Oklahoma.
“Previous statute had compensated districts with declining enrollments by funding ‘ghost students’ for up to three years after they had transferred out of that district,” the report noted of Indiana’s efforts. “Going forward, the state will fund schools based upon the current student count.”
In 2009, Indiana’s state superintendent of public instruction estimated that Indiana taxpayers had sent $94 million to schools to support more than 16,000 students who weren’t enrolled in those districts.
When legislation advanced to use a current-year student count for funding, Indiana’s Legislative Services Agency concluded that 200 districts in that state were overfunded due to the ghost-student system, while 143 had been underfunded and would receive financial benefit from using current-year counts. Another 15 districts were expected to see no change in funding.
Matthew Ladner, an author of the 2012 American Legislative Exchange Council report, now works as the senior research strategist for the Arizona Chamber Foundation. He notes Arizona faced similar ghost-student problems due to its funding formula.
In Arizona, public charter schools were funded based on current-year student counts, but traditional public schools were funded based on the prior year’s student numbers. When students left a traditional public school for a public charter school, Ladner said it resulted in “more and more kids that we were double-funding for a year.”
“A kid would leave a district to go to a charter school, which happens frequently, and the district would still be getting funded for them, and the state would fund them in their new charter school this year,” Ladner said.
A report from the Goldwater Institute estimated Arizona was paying $125 million annually to educate more than 13,000 ghost students.
Oklahoma officials have already attempted to prevent funding of ghost students in one area—online schools, where funding is already based on current-year population counts. According to a presentation given by Department of Education officials several years ago, “the weighted average daily membership for the first year of operation and each year thereafter of a full-time virtual charter school shall be determined by multiplying the actual enrollment of students as of August 1 by 1.333” [emphasis in original].
As a result, when a student transfers from a traditional public school to a virtual charter school in Oklahoma, the child can be counted in the population of both schools and the prior school still receives funding to educate the departed student.
If a current-count system works for online schools in Oklahoma and all schools in other states, why are all Oklahoma schools not funded based on current student populations? The answer, officials say, is simple: politics.
“Every time you do something, there’s winners and there’s losers,” said former state Rep. Dennis Casey, R-Morrison. “And so, as politicians, I don’t know if they really want to do anything, because they’ll look at it and go, ‘Well, that affects my district.’ Or they’ll say, ‘I’m all for this. This helps my district.’ And so we get nothing done.”
Casey is a former school administrator who served as vice chair of the House Appropriations & Budget Committee during his legislative tenure and also served on a funding-formula task force. While he said the formula needs adjustments, he warned that enacting even modest change is politically daunting.
Casey noted the state holds some appropriation funds back for districts that experience growth beyond expectations. Those funds are released in the middle of the school year based on student figures provided after the start of the school year.
As a result, even officials at districts that are technically shortchanged by the school-funding formula are content to leave it in place, despite funding of ghost students elsewhere.
“You kind of have the best of both worlds,” Casey said. “You get the money because you grew, and you’ve got the money even though you’ve gotten smaller.”
Caldwell, who noted the “education establishment is pretty change-averse,” is also skeptical that lawmakers will end the funding of ghost students, noting the attitude of school administrators who served alongside him on the funding-formula task force.
“For the superintendents that were there, the basic message was, ‘We know it needs to be tweaked and fixed, but we’ve also figured out how to work under the current system, so don’t change it,’” Caldwell said.
Stanislawski said legislation has been filed “many times” to eliminate the use of backward-looking head counts that result in the funding of ghost students at Oklahoma schools, but “with no success.”
“It’s a legal way to rob other school districts, and yet they all don’t mind playing that game and being robbed,” Stanislawski said. “And it’s a farce.”
He said one measure to address the issue cleared the Senate this year and could receive a hearing in the House in the 2020 session.
The argument for basing school funding on prior-year population figures is that districts hire staff and make other purchases in advance of a school year, so if enrollment is significantly lower than expected, it can create financial problems unless funding reductions are implemented slowly over several years.
But Schlomach thinks it is a mistake to automatically provide excess funding to those schools.
“You ought to make these districts actually make the case for why they ought to get relatively more funding while they’re losing enrollment,” Schlomach said.
Ladner said similar objections were raised in Arizona.
“There’s always some case that the districts will make for keeping things this way,” Ladner said. “I think, in the end, it was like, alright guys, look: If we’re going to draw up a list of funding priorities, where does ‘funding ghost students’ fall on the priority list? So they made the change.”
Stanislawski, who supported legislation this year that increased financial transparency requirements for online schools like Epic, hopes lawmakers will finally address the ghost-student problem next year, especially given the publicity it is now receiving.
“It’s not equitable for all students across the state,” Stanislawski said. “The funding formula needs to be modernized.”
Note: A veteran journalist, Ray Carter is director at the Center for Independent Journalism, based at the Oklahoma Council of Public Affairs in Oklahoma City. This report first appeared at the OCPA website and is reposted with permission.