Windfalls and Wages: The Fiscal Effects of Missouri’s Charter School Funding Surge

• In Event: The Design of School Funding Formulas: Distributional Consequences across Federal and State Policy

Abstract

A growing body of evidence suggests that increasing school funding improves student achievement, yet charter schools typically operate with substantially less revenue than traditional public schools serving the same communities. Despite decades of charter school expansion, little is known about how charters respond when funding constraints are relaxed, as the school finance reform literature has focused almost exclusively on traditional public districts. Missouri's HB 1552 of 2022 provides a rare opportunity to study this issue. The reform created a new payment component within the state's funding formula intended to equalize per-pupil revenue between charter schools and traditional public school districts in Kansas City and St. Louis, where charters now enroll 51 and 41 percent of public school students, respectively. Because the reform calculates payments as the per-pupil gap between host district and charter revenue, and because district enrollment has been declining while local property tax revenue rises, HB 1552 payments have grown rapidly and with no statutory cap, already exceeding three times the bill's original fiscal note estimates by 2025-26.

We provide the first comprehensive fiscal evaluation of HB 1552, addressing five research questions: what explained pre-reform revenue disparities, how much additional revenue the reform generated, how charters altered expenditures in response, what the fiscal sustainability implications are, and how additional revenues from HB 1552 impacted student learning. We combine highly detailed district financial data covering nearly all Missouri LEAs from 2001 through 2025 with administrative payment transmittal records that document the precise mechanics and magnitude of HB 1552 payments. To estimate causal effects on revenue, we employ a difference-in-differences identification strategy comparing charter schools to traditional public school districts unaffected by the reform. To isolate charter expenditure responses from concurrent federal COVID relief spending, we augment the difference-in-differences framework to exploit substantial variation in pandemic aid across both charter and traditional public LEAs. Lastly, we assess fiscal sustainability using city-specific vector autoregression models with Monte Carlo simulation to generate probabilistic five-year payment forecasts.

We find that HB 1552 increased charter state and local revenue by $2,361 per pupil on average, growing to approximately $5,800-6,300 per pupil by 2025-26. Roughly one-quarter of gross revenue gains were offset by crowd-out of philanthropic donations. Charters translated nearly all net revenue into increased spending ($2,613 per pupil), directing it disproportionately toward instructional support services (i.e., counselors, curriculum specialists, and student health) rather than direct classroom instruction. Over 75 percent of new expenditures went to personnel costs, while administrative and operational spending was essentially unchanged. Forecasts project median per-pupil payments reaching $13,193 in Kansas City and $10,099 in St. Louis by 2030-31, with wide uncertainty bands.  Preliminary analyses using school-level value-added measures suggest that the revenue increase has translated into meaningful achievement gains in math (0.21 school-level standard deviations, equivalent to moving the median charter from the 50th to the 59th percentile of the school quality distribution), with no detectable effect on ELA. We have recently received student-level data and, if accepted, will present those results.

Authors

• Andrew Mitchell Camp, Brown University
  Presenting Author

• Collin Hitt, Saint Louis University
  Non-Presenting Co-Author