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Author: Carrie Stewart

Applying Charter Authorizing Principles in the Early Childhood Field

By Abby McCartney and Carrie Stewart

Introduction: Early Care and Education at a Crossroads

Despite its importance for children’s development, the Early Care and Education (ECE) field has historically often been excluded from broader conversations about education quality and investment. This is changing: an increasing number of state and federal leaders are prioritizing public funding and support for early education. There is still much work to be done to pay and support ECE providers like the skilled educators they are.

As support and investment in ECE increase, policy makers should celebrate the diversity of options available to families and ensure that future public investments are inclusive of all types of ECE models. This goal has much in common with NACSA’s view on charter authorizers’ ongoing work to increase access to quality, expand parent choice, and implement strong accountability. The charter and ECE fields have much to learn from each other.

Background

The ECE field—like charter schooling and authorizing—is at an inflection point. Both sectors use a mixed delivery system (there is a range of charter school types, just as there is a range of ECE provider types), and both currently face labor shortages, compensation pressures, and chronic system underfunding. The ECE sector has long faced a fundamental challenge: high-quality care is too expensive for most families to afford, while the educators who provide this care are dramatically underpaid, earning less than $30,000 per year on average. In the face of an increasingly competitive labor market, providers have particularly struggled in recent years to find and retain qualified staff. Federal relief funds helped many providers supplement staff pay and keep their doors open; as these funds expire, many providers are facing a severe funding and workforce crisis.

At the same time, there is an increasing recognition of the need for more stable public investment into care and learning for our youngest children. The Build Back Better legislation that passed the House in late 2021 held the potential for a dramatically expanded and transformed ECE system, although it fell short of enactment in the Senate. Some states, including New Mexico, Illinois, Minnesota, and Vermont, are making historic investments to expand access to subsidized care and raise wages for providers. As parts of the ECE field gain access to more stable funding, there is an opportunity to invest in quality—which can mean different things to families and educators in different settings.

The policy decisions made in the next few years will set the course of the ECE system for years to come. As policymakers approach these challenges, they can learn from high-quality charter school authorizers’ work. A “one-size-fits-all” approach will not support the diverse needs of ECE providers. The lessons that NACSA has learned from its charter school authorizing experience can guide us toward an approach that better reflects the diversity of the ECE field, forming a “north star” of quality to work toward as we rebuild.

Defining Quality

One of the crucial insights of charter school authorizing is to measure outcomes rather than inputs. This is an important goal, although it looks fundamentally different in early childhood, when each child is developing at their own pace. Unlike in K-12 education, young children generally do not take standardized tests; assessments are developmental and formative rather than summative. As a result, many state Quality Rating and Improvement Systems (QRIS) for early childhood providers rely heavily on inputs, such as credentials held by educators, class size ratios, and facility features. These inputs may be correlated with quality—for example, small class sizes support more high-quality adult-child interactions—but they can also disadvantage programs with fewer financial resources. For instance, an educator with decades of experience and an exceptional ability to nurture young children may not receive “credit” toward a higher quality rating if she does not also hold a formal educational credential.

The ECE field can learn from NACSA’s “multiple measures” approach to build a more flexible and outcomes-oriented approach to measuring quality. Such an approach could consider factors like classroom observations, family satisfaction, and measures of kindergarten readiness and success. Measuring these outcomes may require better coordination between ECE and K-12 systems to track children’s success over time, including a feedback loop between ECE settings and elementary education.

Like charter schools, ECE programs come in different shapes and sizes. The ECE field encompasses everything from a home-based provider caring for a few children in her own home, to large community-based child care centers, to school-based preschool. Programs have different philosophical approaches: Montessori programs embrace child-directed learning, while Head Start programs emphasize wraparound support for the entire family. Nonetheless, state evaluations of quality often apply a one-size-fits-all approach. For example, state pre-K programs often lay out requirements for facilities and staff credentials that are designed for school-based settings, which can exclude community-based and home-based providers from participating in these public programs.

High-quality charter authorizers offer a model for flexible, yet rigorous, oversight that uses metrics that can accommodate different instructional models. These accountability and performance frameworks create incentives to meet quality outcomes, while giving programs flexibility to reach those in their own way. As NACSA’s recent report puts it, “More than any one proven resource or practice, what NACSA and the authorizing field have developed is a mindset and process of continuous evolution and adjustment.”

Many states have funding streams dedicated to improving ECE program quality. The sources of these funding streams should learn from authorizers’ flexible, outcomes-oriented approach. More work is needed to develop a differentiated approach to quality to ensure that different types of providers can succeed.

Community-driven Decision Making

The ECE field has a long history of engaging families and communities in decisions. Since the 1960s, Head Start Policy Councils have made families and community members partners in important financial and governance decisions. Many ECE providers have staff specifically dedicated to engaging and supporting families’ needs.

Because ECE programs largely operate independently, outside the purview of a school district or other regional organization, many areas have a gap at the regional level when it comes to assessing community need, equitably distributing slots, and seeking community input on new or expanded program models.

Some states are investing in regional councils or networks to address these needs. For example, Birth-Five Councils in Illinois conduct regional needs assessments, build local relationships, and support the community with developing action plans to address local needs. Similarly, Ready Start Networks in Louisiana assess local demand for early care and education, develop strategic plans, and identify local funding that can be leveraged to support access.

Effective charter authorizers provide a model for these new organizations to help regions think holistically about need, demand, and diversity of options for families. To meet a community’s needs, both charter authorizers and regional early learning councils must understand where the need is and what kind of need it is. For example, an area near a hospital may need more home-based providers who can provide non-traditional-hours care to accommodate workers with overnight shifts, while an area with a large concentration of recent immigrants may need to prioritize culturally and linguistically responsive curricula and educators. Without this collaborative, centralized enrollment planning, communities may inadvertently end up investing in programs that do not match families’ real needs.

Building Capacity

For both ECE providers and charter schools, operational capacity is a prerequisite to offering a high-quality educational program. Like charter schools, ECE providers typically have disproportionately complex public funding streams to manage, relative to their size. Even a small early learning program may be blending a variety of funds with different use and reporting requirements, including state child care subsidies, private tuition, state pre-K funds, federal Head Start grants, and other grants or fundraising. In addition, many ECE providers struggle to adopt business practices that would make their programs more sustainable, such as accessing efficient back-office services and effectively tracking enrollment and tuition to ensure that fees are paid on time.

The ECE field can learn from charter authorizers’ assessments of the most important operational factors that make a program viable over the long term. The ECE field also needs to go beyond assessing viability to supporting providers to develop their operational capacity. This can mean providing training, on-call support, and easy access to shared services that take the burden off small programs. At the system level, it also means streamlining public funding and reporting requirements to reduce the burden on educators, allowing them to focus on their most important work: supporting children and families.

Iron Sharpens Iron: Collaboration Amongst Memphis Charter School CFOs

The vote to disband Memphis City Schools, seceding into six separate school districts, proved to be an egregious example of intentional segregation. That choice deepened existing opportunity gaps facing Tennessee’s highest-need students, while allowing school funding inequities to persist. But Memphis Shelby County Schools and its charter school leaders in this state refuse to back down on issues ranging from school funding policy to curriculum—and they know that changing the education funding formula can have lasting impacts.

In underserved communities like Memphis, schools get pitted against each other—for resources, for staff and student recruitment, even when they are part of the same local education agency. That resource-related competition dynamic is a byproduct of unjust education funding policy.

By elevating collaboration over competition, Afton has facilitated a cohort of Chief Financial Officers (CFOs) in Memphis for the past two years, including Gestalt Community Schools, Freedom Preparatory Academy, Journey Community Schools, and KIPP Memphis. Collaboration has enabled cohort members to feel more confident in their roles and better equipped to lead their schools’ finances. The four charter school CFOs in the Memphis cohort have built trust and learned the benefits of peer networking…because it’s ultimately a larger fight and one that they’re in together. Especially in Memphis, it will require a collective effort to rise above systemic barriers.

Our cohort holds rich discussions that leverage research and data and support these leaders to problem solve and take action. But if I’m being honest, I’m learning as much from them, and their acumen and tenacity, as they are from us. These inspirational leaders are doing transformative work for our students, our schools and our communities. I’m honored to work with them.

-Carrie Stewart

Anika Baltimore is the CFO for Freedom Prep.

Norriese Rogers, the Chief Financial & Human Resources Officer for Gestalt.

Anika and Norriese both graciously shared more with us about their collaboration and how the cohort has impacted their work.

Can you tell us about the cohort in your own words?

Norriese Rogers: The cohort is amazing. It has given CFOs in our area not only a sounding board, but an opportunity to think about best practices and collectively problem solve. Many of us are facing similar challenges, such as how to effectively allocate ESSER funds. Before the cohort, I felt like I was doing this work in isolation. Now, I have a safe space to discuss what I’m experiencing and learn from other’s expertise and knowledge.

What motivated you to join the cohort?

Anika Baltimore: We have a responsibility to ensure the organization’s sustainability. The first part of every meeting is, “What are the hot topics?” where we discuss the most immediate challenges. It’s such helpful context to discuss this with folks in the same position and juggling similar responsibilities. Since I was new to working for Memphis schools, this cohort started at the perfect time for me as I suddenly had this incredible team I could rely on. I was connected through Afton, who did our financial model.

Can you tell us about your individual initiatives at your schools since joining the cohort?

Norriese Rogers

  • Motivating Educators: We used ESSER funds to implement bonuses for staff, where they can earn up to $2500 per quarter based on student interim assessment scores. This stipend extends to our entire staff, where janitors and secretaries can earn up to $1,000 for individualized or small-group tutoring. Not only is our staff really excited about this, since we’ve never had bonuses aligned to outcomes for students, we’re already seeing it have a real impact on achievement and growth.
  • Staff Retention: We had staff members going through significant challenges in connection with the pandemic. In response, we established a “Gestalt Cares” initiative, where we were able to support team members through initiatives like donating Paid Time Off (PTO) and supporting additional Employee Assistance Programs (EAP). This has had a positive impact on retention.
  • School Expansion: We’re currently working on an acquisition for our fourth campus, which would allow us to provide excellent educational opportunities to more Memphis children.

Anika Baltimore

  • Compensation Plan: We were able to codify and bring structure to our compensation plan. Based on the analysis, we were able to attain more stability, so our compensation was predictable and aligned to our school’s vision.
  • Benefits: We also improved our employee benefits package. We improved our plan and were able to incorporate holistic medical coverage, adopt a paid leave plan, and not drastically change our rates for employees.
  • Facility Financing: We recently closed on a $22 million Equitable Facilities Fund (EFF) financing to refinance, purchase our fourth and final building, and conduct needed renovations.

Are there any broader lessons or takeaways you’d share with other leaders that you have gained from this experience? If so, can you tell us about them?

Anika Baltimore: Anytime there’s an opportunity to collaborate and build a network of like-minded people who can push you and help you think about things you wouldn’t normally think about—take it. Whatever role you play, whatever you are, it gives you a set of eyes from people who also deeply get it.

Norriese Rogers: Use your resources. And this cohort has proven to be a tremendous resource. Although Afton brought us together, we email each other all the time seeking advice, commiseration, and input. We don’t have unlimited resources but this one group has proven, again and again, to be invaluable. Collaboration is key. Iron sharpens iron. I don’t really boast, but the folks in this cohort are the sharpest CFOs in this state. Without this cohort we wouldn’t have the opportunity to learn from each other, or even know each other.

Anika Baltimore and Norriese Rogers are two of five members of the Memphis CFO Cohort. The other three members include: Angela Carr (and formerly Kaleo Curtis) from KIPP Memphis and Matt Seigel & Randi Owens from Journey Community Schools. The group has met bi-weekly or monthly over the last two years.

Altering Authorizing

Charter school authorizers seek to ensure the quality of our nation’s public charter schools. Key to ensuring quality is having robust measures for accountability—academic, governance and financial. This work is of heightened importance given the Trump administration’s focus on expansion of school choice.

Financial sustainability is more closely intertwined with academic strategy and board governance than many district and charter school administrations appreciate. Financial accountability practices are at the core of protecting the interests of students and the public, one of three principles of quality authorizing established by the National Association of Charter School Authorizers (NACSA).

Instituting financial performance standards should enable an authorizer to monitor and evaluate a charter school’s financial sustainability in the short- and long-term. Such standards are relevant to all school types – including alternative charter schools that enroll students who have dropped out or have been adjudicated, or who face other circumstances that have prevented them from attending school.

Many cities, including Chicago and Buffalo, have recently committed to expanding the number of alternative school seats in their districts. Many are realizing this expansion by increasing the number of charter schools they authorize. This makes it even more important for charter authorizers to implement standards that help ensure school quality.

As NACSA pointed out in an October 2013 press release, alternative schools serve a different set of student needs. As such, authorizers need to “provide specialized oversight, tailoring oversight and monitoring to the circumstances of alternative schools.” This kind of specialized oversight is necessary for academic performance standards, and arguably just as much so for financial accountability.

Financial Best Practices: Supporting Academics, Promoting Sustainability

Afton Partners focuses on establishing financial best practices in public education. Since financial best practices support sustainability of effective education, our work is about much more than crunching numbers. The quality of a district or school’s governance, the design of its academic programs and its schools, and the relative success of its academic performance all significantly impact financial sustainability.

Governance and school design are just as important in the success of alternative schools as with all other school types; however, certain different characteristics can come into play with alternative schools, including:

  • For-profit management: Many alternative schools are established by for-profit companies.
    Subcontracting: Alternative school operators sometimes establish a charter with the authorizer and subcontract the educational operations of a school to a community partner or other agency.
  • Non-traditional school design: Often, alternative schools use technology to implement their instruction and offer more individualized student schedules.
  • Student mobility: Alternative schools may have high student mobility rates throughout the year. This affects how much revenue comes to a school as well as the use of staff and instructional time.

Through some of Afton’s recent engagements, we have seen how authorizing alternative school models require a specialized approach—particularly in the area of financial accountability.

Adapting to Alternatives: Financial Accountability for Authorizers

These varying characteristics of different alternative charter schools suggest there should be differences in how authorizers implement financial practices and accountability measures for such schools. Authorizers can approach this challenge by supplementing existing processes in important ways:

Authorization application process

In their RFPs, authorizers should ask alternative charter operators specific questions that allow the authorizer to evaluate the alternative school’s finances appropriately. These questions should focus on:

  • How the local entity and any potential related-party management company will implement governance, including how they will uphold the independence of financial operations between charters and subcontracted service providers as necessary to ensure financial integrity;
  • How the school will maintain transparency with respect to the contractual terms of any potential management agreement – including fees and the costs of goods and services paid to any management companies and their affiliated entities, and describing the goods and services they anticipate will be provided;
  • How the school’s budget will be allocated to align with student needs and the school’s design; and,
  • How the school will be transparent about subcontracting school operations and the practices that the school will institute to ensure quality in those situations.

Contracting and renewal process

Authorizers should add terms in its contracts with alternative charter schools that allow for ongoing evaluation to reflect enhanced approaches to financial accountability. Examples of such terms include:

  • School-specific audited financial statements. Authorizers could require all operators, including for-profit companies running alternative schools, to provide interim year-to-date and audited annual financial statements specific to the authorized school.
  • Separated financial controls. Authorizers could require operators that have contracted with management companies to have separate bank accounts, an independent board and finance committee, separate accounting and financial planning teams, and clearly established protocols for ensuring the school—and not the management company—owns any goods purchased or work papers created with public funds.
  • Subcontracting accountability standards. Authorizers could require operators that subcontract education services to partners or other agencies to abide by and be transparent about any contracts signed with subcontractors, the services to be provided, and the associated fees. Additionally, the authorizer could consider establishing standards for accountability that the operator must use with its own subcontractors to monitor quality, similar to those standards that the authorizer themselves is implementing with the schools it oversees.
  • Financial metrics. Authorizers could establish a specific set of metrics for financial accountability and conduct compliance checks annually with alternative charter school operators.

Annual evaluation process

Authorizers should implement an annual financial evaluation of an alternative charter school that includes reviews of its prior year’s financial performance and contract compliance, its annual budget, and its current year’s interim financial statements.

These reviews should depend on quantifiable financial metrics that recognize the various school and governance designs that are prevalent in alternative schools. Both the prior-year and annual budget reviews should use scorecards that review the financial health of the alternative school, including metrics typically used at any school: liquidity, debt coverage, audit findings and operating performance. These should be enhanced with financial metrics suited to the alternative school, allowing analysis of resource allocations, mid-year per-pupil revenue fluctuations, management fees, and the use of personnel, technology and other services in alignment with meeting unique student needs.

As part of the prior-year review, a full compliance check should be done on the contractual terms to be implemented with such schools, including any of the unique aforementioned contractual terms for alternative charter schools. As part of the annual budget review, alignment to the charter agreement’s approved plan should be checked, especially resource allocation and management fees and services. In reviewing the current year’s interim financials, the authorizer should be mindful of the potential for high student mobility and the impact it could have on cash and overall financial performance. Material deviations in actual performance compared to the budget should necessitate an explanation from the operator.

Conclusion

Charter authorizers face a complex challenge in assessing alternative schools and new school models—in part because the variety of innovative approaches and school structures makes comparison and analysis more complex.

Though they certainly need to be adapted to specific circumstances, financial practices and accountability standards are by their nature similar across different systems and models. Implementing and monitoring such standards for accountability offers authorizers an important way to gauge the viability of proposed schools and assess the relative success of those already operating. Financial viability and academic performance should be evaluated in tandem, with models that fail reviews receiving the scrutiny they warrant—and successful alternative models supported to the extent they deserve.

Carrie Stewart is co-founder and managing director of education finance advisor Afton Partners; Carrie is based in Chicago.