Economic Issues and Student Achievement in Nonprofit Schools

Introduction

This paper examines the economic issues of student achievement in a nonprofit school environment. To that end, it surveys literature across several areas of study to produce a synthesis of the information and knowledge available on the economic impacts of achievement among students who attend nonprofit schools. Issues examined include nonprofit accountability, the accountability levels required to produce higher student achievement, and the availability of resources for student learning that results in measurable achievement.

Many nonprofit schools are reported as failing. For example, a nonprofit school district in New Orleans announced plans to focus on failing public schools, with a Recovery School District official planning to launch a nonprofit charter-management organization aimed at taking over and turning around failing campuses. This move was described as representative of "a national trend toward creating groups that can step in and transform failing campuses," further signaling "the latest evolution in a survival-of-the-fittest school landscape in New Orleans" (RENEW Charter Management Organization, 2009).

Ebrahim (2010), in "The Many Faces of Nonprofit Accountability," writes that nonprofit leaders "face multiple and sometimes competing accountability demands: from numerous actors (upward, downward, internal) for varying purposes (financial, governance, performance, mission) and requiring differing levels of organizational response (compliance and strategic)."

Nonprofit Economic Outlook and Funding Challenges

According to the Business Monthly's "Forecast 2011: Clouds Breaking, Business Looking Up," nonprofit organizations were facing another tough year financially. Nonprofits were being "forced to navigate challenging opposing forces. With slow overall economic growth and deeper cutbacks in government spending, general needs continue to grow in our communities. Anxiety and stress, increased housing and employment insecurity, and aging infrastructures leave our communities and our environment at risk — increasing the demand for the services provided by nonprofit organizations" (Smith, 2011).

The combination of "decreased incomes, depleted investments and declining tax bases" was reported to be resulting in "less financial support from the individuals, foundations and governments that traditionally support nonprofit organizations" (Smith, 2011). Difficult strategic decisions were required for nonprofits with respect to "maximizing the likely decreases in resources and assets available. For some, this will be an opportunity for innovation; for others, it may mean further narrowing of missions, limiting services or reducing service provision and employment" (Smith, 2011). The "new economic and political environments are far more volatile than they have been and will require organizations that can navigate change and better forecast future demand and support" (Smith, 2011).

The report "2010 Charter School Facility Finance Landscape" notes that approximately 5,000 public schools were operating under charters and educating approximately 1.5 million children nationally. An ongoing problem for these schools is the "lack of access to appropriate public facilities or to public funding" (Educational Facilities Financing Center, 2010). Charter schools differ from traditional school districts in that they "do not have taxing authority and must rely on limited public capital funds and operating revenues to pay for their facilities" (Educational Facilities Financing Center, 2010).

Overview of Nonprofit Charter School Funding

There has been significant expansion in charter school financing over the last twenty years. Support in the earlier phases came from "nonprofit community development organizations with support from the philanthropic community and the U.S. Department of Education" (Educational Facilities Financing Center, 2010). At the time of the report, more than 24 private nonprofit organizations provided financing for charter schools totaling $1.1 billion in direct financial support and an additional $369 million in New Market Tax Credit (NMTC) allocations (Educational Facilities Financing Center, 2010).

In the private sector, 29 nonprofit organizations were reported to "provide significant facilities assistance to charter schools in the form of grants, loans, guarantees, real estate development and technical assistance" (Educational Facilities Financing Center, 2010). Seven foundations also made commitments to facility financing "on a more localized basis, providing grants and program-related investments (PRIs) to help finance charter school facilities" (Educational Facilities Financing Center, 2010). In addition, "twenty nonprofit organizations provide financing for charter school facilities as part of their community development or charter support missions. Three organizations provide real estate development services, including one that also provides credit enhancement and loan financing for charters" (Educational Facilities Financing Center, 2010). The total provided by these nonprofits reached $1.1 billion in direct financial support to charter schools.

Charter schools additionally received funding from seven federal programs providing various kinds of assistance. The U.S. Department of the Treasury was also reported to allocate authority for "three federal tax credit programs for which charter schools are eligible" (Educational Facilities Financing Center, 2010).

Public Charter Schools Program start-up funding sources include private donors (83%), the state in which the school is located (45%), authorizer funding (16%), and other sources (16%) (U.S. Department of Education, 2002). Charter school reports of uses of start-up subgrants — expressed as a percentage of schools surveyed (n=292) — are as follows:

Instructional materials (87%); professional development (79%); computer materials (78%); consultants (61%); staff salaries (61%); recruiting and public relations (60%); renovations (58%); renting or leases (41%) (U.S. Department of Education, 2002).