Charter Competition and District Finances

Charter schools enroll a growing share of public school students, leading to concerns about the financial implications of charter schools for traditional public schools. Using detailed expenditure data for school districts in California, this paper exploits variation in charter school enrollment across time and between districts to evaluate how district spending and overall financial health change as nearby charter sectors expand. The analysis shows that larger charter enrollment shares are associated with lower levels of per-pupil spending and reduced fiscal health in traditional public schools. However, these relationships in some cases exhibit significant nonlinearities and are much smaller in magnitude than what has been observed in other states. Consequently, larger charter enrollment shares are not associated with differences in the proportion of expenditures allocated to various activities, goods, or services. Differences between these results and those from similar analyses in other states may be explicable in terms of California’s economic and policy context, providing lessons for policymakers.