The Fordham Institute released a new report on charter school funding in St. Louis and Kansas City. The report examines House Bill (HB) 1552, a Missouri law enacted in 2022 to equalize funding between public charter schools and traditional public schools in these cities.
The law addressed a real problem. Traditional public schools were receiving substantially more funding per student than public charter schools, despite charter schools being significantly more effective at educating students. In the year before HB 1552 went into effect, charter schools in these cities received approximately 30 percent less funding per student—a gap of $7,000 to $8,000.
The objective of the policy was noble. We should provide at least as much funding to public charter schools as we provide to traditional public schools. Indeed, if funding followed productivity, charter schools would receive more funding because they generate more student learning per dollar invested. Only in government would we systematically provide the most resources to the least efficient providers.
But while HB 1552 was well-intentioned, it has gone off the rails. The Fordham report provides the gory details; below I provide a short summary of what happened.
Here’s how the law works: Under HB 1552, the state calculates the state and local revenue per pupil received by each host district—Kansas City or St. Louis—and then provides additional state funding to charter schools to make up the difference between their funding and the host district’s funding.
At first glance, this sounds sensible. And the law did substantially increase charter school funding. But it hasn’t closed the funding gap because funding for the traditional public school districts has risen even faster, and the catch-up funds are calculated based on lagged data.
The fundamental flaw is that HB 1552 does not fix the underlying inequity in the distribution of local revenue. Charter and traditional public schools still do not share local revenue equally. Instead, the traditional districts retain nearly all local property tax revenue, and the state is responsible for backfilling the resulting gap for charter schools.
This creates a perverse feedback loop.
Suppose a student leaves a traditional public school to attend a charter school. The traditional district loses the student but retains nearly all of its local property tax revenue. With the same local revenue spread across fewer students, the traditional district’s local revenue per pupil rises. HB 1552 then uses that higher per-pupil figure to determine how much funding charter schools should receive, forcing the state to spend more to keep up.
This mechanism is especially problematic because enrollment in the traditional city school districts has been declining for decades, while local property tax revenues have been increasing lately. As enrollment falls, district revenue per pupil rises. As district revenue per pupil rises, the state owes charter schools more. As the funding gap continues to move, the state keeps chasing it.
The result is a bizarre upward funding spiral with no obvious end. The cost of HB 1552 has already far outstripped the estimate in the original fiscal note. The Fordham authors project expenditures under the law into the future and conclude that it is unlikely to be fiscally sustainable. They identify the primary driver as the “relentless increase in host districts’ local revenues per pupil.”
The lesson here is that policy design matters. HB 1552 started with the right objective: Charter schools, which substantially outperform traditional public schools, should receive at least as many resources. But instead of fixing the underlying inequity in how local revenue is distributed, lawmakers created an open-ended state obligation tied to an ever-moving target.
Now the chickens are coming home to roost.
Missouri’s budget is in dire straits. We cannot afford unforced errors like HB 1552.
